UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended ~~June~~September 30, 2013

o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ____________ to ____________

Commission file number: 0-28806

Ever-Glory International Group Inc.

(Exact name of registrant as specified in its charter)

Florida		65-0420146
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

Ever-Glory Commercial Center,

509 Chengxin Road, Jiangning Development Zone,

Nanjing, Jiangsu Province,

People’s Republic of China

(Address of principal executive offices)

(8625) 5209-6875

(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes x No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). x Yes o No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definition of “large accelerated filer,” “accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. o

Large accelerated filer	o	Accelerated filer	o
Non-accelerated filer	o	Smaller reporting company	x

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No x

As of ~~August 7,~~November 9, 2013, ~~14,777,610~~14,781,241 shares of the Company’s common stock, $0.001 par value, were issued and outstanding.

EVER-GLORY INTERNATIONAL GROUP, INC.

FORM 10-Q

INDEX

		Page Number

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS		3

PART I. FINANCIAL INFORMATION		4

Item 1.	Financial Statements	4

	Condensed Consolidated Balance Sheets as of ~~June~~September 30, 2013 (unaudited) and December 31, 2012	4

	Condensed Consolidated Statements of Comprehensive Income for the ~~Six~~Three and Nine Months Ended ~~June~~September 30, 2013 and 2012 (unaudited)	5

	Condensed Consolidated Statements of Cash Flows for the ~~Six~~Nine Months Ended ~~June~~September 30, 2013 and 2012 (unaudited)	6

	Notes to the Condensed Consolidated Financial Statements (unaudited)	7

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	16

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	29

Item 4.	Controls and Procedures	29

PART II. OTHER INFORMATION		30

Item 1.	Legal Proceedings	30

Item 1A.	Risk Factors	30

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	30

Item 3.	Defaults Upon Senior Securities	30

Item 4.	Mine Safety Disclosures	30

Item 5.	Other Information	30

Item 6.	Exhibits	30

SIGNATURES		31

Cautionary Note Regarding Forward-Looking Statements

Statements contained in this Quarterly Report on Form 10-Q, which are not historical facts, are forward-looking statements, as the term is defined in the Private Securities Litigation Reform Act of 1995. Such forward-looking statements, whether expressed or implied, are subject to risks and uncertainties which can cause actual results to differ materially from those currently anticipated, due to a number of factors, which include, but are not limited to:

●	x	Competition within our industry;
●	x	Seasonality of our sales;
●	x	Success of our investments in new product development
●	x	Our plans and ability to open new retail stores;
●	x	Success of our acquired businesses;
●	x	Our relationships with our major customers;
●	x	The popularity of our products;
●	x	Relationships with suppliers and cost of supplies;

●	x	Financial and economic conditions in Asia, Japan, Europe and the U.S.;
●	x	Anticipated effective tax rates in future years;
●	x	Regulatory requirements affecting our business;
●	x	Currency exchange rate fluctuations;
●	x	Our future financing needs; and
●	x	Our ability to attract additional investment capital on attractive terms.

Forward-looking statements also include the assumptions underlying or relating to any of the foregoing or other such statements. When used in this report, the words “may,” “will,” “should,” “could,” “expect,” “plan,” “anticipate,” “believe,” “estimate,” “predict,” “continue,” and similar expressions are generally intended to identify forward-looking statements.

Readers are cautioned not to place undue reliance on these forward-looking statements, which reflect management’s opinions only as of the date hereof. We undertake no obligation to revise or publicly release the results of any revision to these forward-looking statements. Readers should carefully review the factors described in the Section entitled “Risk Factors” on Form 10-K and other documents we file from time to time with the Securities and Exchange Commission (‘SEC’).

PART I. FINANCIAL INFORMATION

ITEM 1. Financial Statements

~~EVER-GLORY INTERNATIONAL GROUP, INC. AND SUBSIDIARIES~~

~~CONDENSED CONSOLIDATED BALANCE SHEETS~~

~~AS OF JUNE~~EVER-GLORY INTERNATIONAL GROUP, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

AS OF SEPTEMBER 30, 2013 (UNAUDITED) AND DECEMBER 31, 2012

~~ASSETS~~

June 30,
2013

December 31,
2012

　　
CURRENT ASSETS
Cash and cash equivalents $ 16,136,753 $ 9,365,958
Accounts receivable 49,748,625 68,513,893
Inventories 56,697,298 46,038,456
Value added tax receivable 4,107,991 2,866,018
Other receivables and prepaid expenses 1,478,315 1,910,383
Advances on inventory purchases 5,313,877 3,596,860
Amounts due from related parties 2,405,039 8,680
Total Current Assets 135,887,898 132,300,248
　　
LAND USE RIGHT, NET 2,823,135 2,801,472
PROPERTY AND EQUIPMENT, NET 17,352,513 16,068,735
TOTAL ASSETS $ 156,063,546 $ 151,170,455
　　
LIABILITIES AND EQUITY
　　
CURRENT LIABILITIES
Bank loans $ 44,823,302 $ 46,919,680
Payble to officers and employees - 2,341,574
Accounts payable 41,120,018 49,700,392
Accounts payable and other payables - related parties 3,374,320 3,158,814
Other payables and accrued liabilities 10,839,202 10,547,190
Value added and other taxes payable 4,198,504 4,189,211
Income tax payable 581,282 952,652
Deferred tax liabilities 3,731,695 3,109,095
Derivative liability -　 294,000
Total Current Liabilities 108,668,323 121,212,608

COMMITMENTS AND CONTINGENCIES 　　

EQUITY 　　
Stockholders' equity of the Company:
Preferred stock ($.001 par value, authorized 5,000,000 shares, 　　
no shares issued and outstanding) - -
Common stock ($.001 par value, authorized 50,000,000 shares, 　　
14,777,610 and 14,772,270 shares issued and outstanding
as of June 30, 2013 and December 31, 2012, respectively) 14,777 14,772
Additional paid-in capital 3,562,243 3,552,166
Retained earnings 52,588,291 46,774,001
Statutory reserve 6,317,715 6,317,715
Accumulated other comprehensive income 8,031,562 6,873,170
Amounts due from related party (23,119,365 ) (33,573,977 )
Total Stockholders' Equity 47,395,223 29,957,847
　　
TOTAL LIABILITIES AND EQUITY $ 156,063,546 $ 151,170,455
ASSETS

	September 30,			December 31,
	2013			2012
CURRENT ASSETS
Cash and cash equivalents	$	11,708,711		$	9,365,958
Accounts receivable		72,495,229			68,513,893
Inventories		70,616,944			46,038,456
Value added tax receivable		6,424,600			2,866,018
Other receivables and prepaid expenses		1,686,233			1,910,383
Advances on inventory purchases		8,281,233			3,596,860
Amounts due from related parties		1,633,869			8,680
Total Current Assets		172,846,819			132,300,248

LAND USE RIGHT, NET		2,822,122			2,801,472
PROPERTY AND EQUIPMENT, NET		18,466,406			16,068,735
TOTAL ASSETS	$	194,135,347		$	151,170,455

LIABILITIES AND EQUITY

CURRENT LIABILITIES
Bank loans	$	48,290,664		$	46,919,680
Payable to officers and employees		-			2,341,574
Accounts payable		68,139,822			49,700,392
Accounts payable and other payables - related parties		5,239,799			3,158,814
Other payables and accrued liabilities		12,136,373			10,547,190
Value added and other taxes payable		3,879,352			4,189,211
Income tax payable		1,242,147			952,652
Deferred tax liabilities		3,642,987			3,109,095
Derivative liability		-			294,000
Total Current Liabilities		142,571,144			121,212,608

COMMITMENTS AND CONTINGENCIES

EQUITY
Stockholders' equity of the Company:
Preferred stock ($.001 par value, authorized 5,000,000 shares, no shares issued and outstanding)		-			-
Common stock ($.001 par value, authorized 50,000,000 shares, 14,781,241 and 14,772,270 shares issued and outstanding as of September 30, 2013 and December 31, 2012, respectively)		14,781			14,772
Additional paid-in capital		3,572,157			3,552,166
Retained earnings		56,471,739			46,774,001
Statutory reserve		6,317,715			6,317,715
Accumulated other comprehensive income		8,701,964			6,873,170
Amounts due from related party		(23,514,153	)		(33,573,977	)
Total Stockholders' Equity		51,564,203			29,957,847

TOTAL LIABILITIES AND EQUITY	$	194,135,347		$	151,170,455

See the accompanying notes to the condensed consolidated financial statements.

EVER-GLORY INTERNATIONAL GROUP, INC. AND SUBSDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

FOR THE THREE AND ~~SIX~~NINE MONTHS ENDED ~~JUNE~~SEPTEMBER 30, 2013 AND 2012 (UNAUDITED)

Three months ended Six months ended
June 30, June 30,
2013 2012 2013 2012
NET SALES $ 59,129,485 $ 47,195,031 $ 137,440,975 $ 100,421,204
COST OF SALES 39,650,917 33,608,450 97,669,484 75,231,635

GROSS PROFIT 19,478,568 13,586,581 39,771,491 25,189,569

OPERATING EXPENSES
Selling expenses 9,898,106 6,966,335 21,749,402 12,800,527
General and administrative expenses 5,513,105 4,198,130 9,985,552 7,203,406
Total Operating Expenses 15,411,211 11,164,465 31,734,954 20,003,933

INCOME FROM OPERATIONS 4,067,357 2,422,116 8,036,537 5,185,636

OTHER INCOME (EXPENSES)
Interest income 342,188 328,736 637,790 610,220
Interest expense (736,695 ) (458,703 ) (1,528,224 ) (1,004,744 )
Change in fair value of derivative liability 2,000 180,000 294,000 290,800
Other income (expenses)
(179,098 ) 200,010 (147,641 ) 236,313
Total Other Income (Expenses) (571,605 ) 250,043 (744,075 ) (132,589 )

INCOME BEFORE INCOME TAX EXPENSE 3,495,752 2,672,159 7,292,462 5,318,225
INCOME TAX EXPENSE (768,541 ) (321,010 ) (1,478,172 ) (845,866 )

NET INCOME 2,727,211 2,351,149 5,814,290 4,472,359

OTHER COMPERHENSIVE (LOSS) INCOME
Foreign currency translation (loss) gain
850,550
(196,365 )
1,158,392
200,001
COMPREHENSIVE INCOME $
3,577,761
$ 2,154,784 $
6,972,682
$ 4,672,360

EARNINGS PER SHARE
Basic and diluted $ 0.18 $ 0.16 $ 0.39 $ 0.30
Weighted average number of shares outstanding
Basic and diluted 14,777,610 14,765,942 14,775,869 14,763,815

EVER-GLORY INTERNATIONAL GROUP, INC. AND ~~SUBSDIARIES~~SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE ~~SIX~~NINE MONTHS ENDED ~~JUNE~~SEPTEMBER 30, 2013 AND 2012 (UNAUDITED)

2013 2012

CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 5,814,290 $ 4,472,359
Adjustments to reconcile net income to cash provided
by operating activities:
Depreciation and amortization 3,690,891 2,296,910
Recovery (Provision) for obsolete inventories (315,354 ) 459,213
Loss from sale of property and equipment 29,499 -
Change in fair value of derivative liability (294,000 ) (290,800 )
Deferred income tax
555,716
563,191
Stock-based compensation 10,082 9,836
Changes in operating assets and liabilites
Accounts receivable 19,994,644 14,295,016
Inventories (9,415,298 ) (2,219,405 )
Value added tax receivable (1,177,837 ) (1,591,861 )
Other receivables and prepaid expenses 307,455 (295,199 )
Advances on inventory purchases (1,473,254 ) (555,284 )
Amounts due from related parties (2,760,288 ) 10,848,191
Accounts payable (9,577,345 ) (8,594,380 )
Accounts payable and other payables- related parties 123,426 (80,515 )
Other payables and accrued liabilities 75,308 36,570
Value added and other taxes payable (77,745 ) (32,117 )
Income tax payable (389,778 ) (90,383 )
Net cash provided by operating activities
5,120,412
19,241,223

CASH FLOWS FROM INVESTING ACTIVITIES

Purchase of property and equipment (4,642,650 ) (2,147,918 )
Proceeds from sale of property and equipment 13,583 -
Net cash used in investing activities (4,629,067 ) (2,147,918 )

CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from bank loans 42,227,892 24,576,457
Repayment of bank loans (45,290,965 ) (31,488,282 )
Repayment of payble to officers and employees (2,381,512 ) -
Repayment of advances to related party 18,781,438 -
Advances to related party (7,244,771 ) (11,794,260 )
Net cash (used in) provided by financing activities 6,092,082 (18,706,085 )

EFFECT OF EXCHANGE RATE CHANGES ON CASH
187,368
(25,764 )

NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS 6,770,795 (1,638,544 )

CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 9,365,958 8,822,581

CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 16,136,753 $ 7,184,037

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:

Cash paid during the period for:
Interest $ 1,528,224 $ 1,004,744
Income taxes $
1,199,771
$ 373,221

	2013			2012
CASH FLOWS FROM OPERATING ACTIVITIES
Net income	$	9,697,738		$	6,746,291
Adjustments to reconcile net income to cash provided by operating activities:
Depreciation and amortization		4,822,183			3,567,779
Provision for obsolete inventories		450,235			399,431
Loss from sale of property and equipment		30,247			-
Change in fair value of derivative liability		(294,000	)		(381,800	)
Deferred income tax		444,186			495,875
Stock-based compensation		19,996			19,809
Changes in operating assets and liabilities:
Accounts receivable		(2,330,145	)		8,677,358
Inventories		(23,596,516	)		(13,797,187	)
Value added tax receivable		(3,440,059	)		(1,997,840	)
Other receivables and prepaid expenses		109,775			(409,176	)
Advances on inventory purchases		(4,370,032	)		(4,620,904	)
Amounts due from related parties		(2,256,980	)		16,878,539
Accounts payable		16,915,180			(2,041,985	)
Accounts payable and other payables- related parties		2,012,075			(1,660,356	)
Other payables and accrued liabilities		1,297,923			5,393,327
Value added and other taxes payable		(418,702	)		(258,968	)
Income tax payable		260,537			(77,826	)
Net cash provided by (used in) operating activities		(646,359	)		16,932,367

CASH FLOWS FROM INVESTING ACTIVITIES

Purchase of property and equipment		(6,748,963	)		(5,109,172	)
Proceeds from sale of property and equipment		13,558			-
Net cash used in investing activities		(6,735,405	)		(5,109,172	)

CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from bank loans		78,467,539			47,783,252
Repayment of bank loans		(78,372,190	)		(38,552,628	)
Proceeds from payable to officers and employees		-			2,166,704
Repayment of payable to officers and employees		(2,377,074	)		-
Repayment of loans from related party		18,746,442			-
Advances to related party		(7,231,272	)		(21,490,190	)
Net cash(used in) provided by financing activities		9,233,445			(10,092,862	)

EFFECT OF EXCHANGE RATE CHANGES ON CASH		491,072			(160,192	)

NET INCREASE IN CASH AND CASH EQUIVALENTS		2,342,753			1,570,141

CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD		9,365,958			8,822,581

CASH AND CASH EQUIVALENTS AT END OF PERIOD	$	11,708,711		$	10,392,722

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:

Cash paid during the period for:
Interest	$	2,285,614		$	1,454,157
Income taxes	$	1,735,809			583,429

See the accompanying notes to the condensed consolidated financial statements.

EVER-GLORY INTERNATIONAL GROUP, INC. AND SUBSIDIARIES

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE ~~SIX~~NINE MONTHS ENDED ~~JUNE~~SEPTEMBER 30, 2013 AND 2012

NOTE 1 BASIS OF PRESENTATION

Ever-Glory International Group, Inc. (the “Company”), together with its subsidiaries, is an apparel manufacturer, supplier and retailer in The People's Republic of China ("China or "PRC"), with a wholesale segment and a retail segment. The Company’s wholesale business consists of recognized brands for department and specialty stores located in China, Europe, Japan and the United States. The Company’s retail business consists of flagship stores and store-in-stores for the Company’s own-brand products.

The Company’s wholesale operations are provided primarily through the Company’s wholly-owned PRC subsidiaries, Goldenway Nanjing Garments Co. Ltd. (“Goldenway”), Nanjing Catch-Luck Garments Co. Ltd. (“Catch-Luck”), Nanjing New-Tailun Garments Co. Ltd (“~~New-Tailun��~~New-Tailun”), Ever-Glory International Group Apparel Inc.(“Ever-Glory Apparel”) and Nanjing Tai Xin Garments Trading Company Limited (“Tai Xin”) (formed on March 19, 2012), and the Company’s wholly-owned Samoa subsidiary, Ever-Glory International Group (HK) Ltd. (“Ever-Glory HK”). The Company’s retail operations are provided through its ~~wholly- owned~~wholly-owned subsidiary, Shanghai LA GO GO Fashion Company Limited (“LA GO GO”).

In the opinion of management, the accompanying unaudited condensed consolidated financial statements of the Company and its subsidiaries contain all adjustments, consisting of normal recurring adjustments, considered necessary for a fair presentation of the condensed consolidated balance sheet as of ~~June~~September 30, 2013, the condensed consolidated statements of comprehensive income for the three and ~~six~~nine months ended ~~June~~September 30, 2013 and 2012, and the condensed consolidated statements of cash flows for the ~~six~~nine months ended ~~June~~September 30, 2013 and 2012. The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and the instructions to Rule 10-01 of Regulation S-X of the Securities and Exchange Commission (the “SEC”). Accordingly, they have been condensed and do not include all of the information and footnotes required by GAAP for complete financial statements. Wholesale revenues are generally higher in the third and fourth fiscal quarters, while retail revenues are generally higher in the first and fourth fiscal quarters. The results of operations for the ~~six~~nine months ended ~~June~~September 30, 2013 are not necessarily indicative of the results of operations to be expected for the full fiscal year. These financial statements should be read in conjunction with the Company’s Annual Report on Form 10-K for the year ended December 31, 2012, and the Company's ~~June~~September 30, 2012, amended Form 10Q/A filed on May 15, 2013.

NOTE 2 SIGNIFICANT ACCOUNTING POLICIES

Financial Instruments

Management has estimated that the carrying amounts of non-related party financial instruments approximate their fair values due to their short-term maturities. The fair value of amounts due from (to) related parties is not practicable to estimate due to the related party nature of the underlying transactions.

Fair Value Accounting

Accounting Standards Codification (“ASC”) 820 “Fair Value Measurements and Disclosures”, establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). The three levels of the fair value hierarchy under ASC 820 are described below:

	Level 1	Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities;
	Level 2	Quoted prices in markets that are not active, or inputs that are observable, either directly or indirectly, for substantially the full term of the asset or liability;
	Level 3	Prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable (supported by little or no market activity).

At ~~June~~September 30, 2013, the Company’s financial assets (all Level 1) consist of cash placed with financial institutions that management considers to be of a ~~high quality.~~higher liquid.

At December 31, 2012 and through mid June 2013, the Company had a derivative liability subject to recurring fair value measurement ~~( Level~~(Level 3) with the change in fair value recognized in earnings (Note 6).

Foreign Currency Translation and Other Comprehensive Income

The reporting currency of the Company is the U.S. dollar. The functional currency of the Company, Ever-Glory HK and Perfect Dream Limited, a British Virgin Islands incorporated subsidiary of the Company (“Perfect Dream”), is the U.S. dollar. The functional currency of Goldenway, New Tailun, Catch-luck, Ever-Glory Apparel, Tai Xin and LA GO GO is the Chinese RMB.

For subsidiaries whose functional currency is the RMB, all assets and liabilities were translated at the exchange rate at the balance sheet date; equity was translated at historical rates and items in the statement of comprehensive income were translated at the average rate for the period. Translation adjustments resulting from this process are included in accumulated other comprehensive income. The resulting translation gains and losses that arise from exchange rate fluctuations on transactions denominated in a currency other than the functional currency are included in the results of operations as incurred. Items in the cash flow statement are translated at the average exchange rate for the period.

Reclassification

Certain amounts reported in the September 30, 2012 condensed consolidated statement of cash flows have been reclassified to conform to the 2013 presentation.

Inventories at ~~June~~September 30, 2013 and December 31, 2012 consisted of the following:

~~Note~~NOTE 4 PAYABLE TO OFFICERS AND EMPLOYEES

The Company established a plan in September 2012. Under this plan, eligible employees may make loans to the Company and earn interest equal to prevailing China bank loan interest rates, normally two to four times rates on savings accounts. The loans could be made only in the period from September 1, 2012 to December 31, 2012. The annual interest rate varies in line with changes in China bank loan interest rates. During the period from September 1, 2012 to June 30, 2013, the average loan interest rate was 6.0% and the total interest expense for the three and six-month periods ended June 30, 2013 was $21,817 and $57,118 respectively. The total balance of $2,381,512 was repaid to the officers and employees during the three months ended June 30, 2013.

On ~~August 2, 2010,~~June 14, 2013, Goldenway entered into a ~~revolving~~ line of credit agreement with Nanjing Bank, which allows the Company to borrow up to approximately ~~$8.08~~$8.13 million (RMB50 million). The line of credit is guaranteed by Jiangsu Ever-Glory International Group Corp. (“Jiangsu Ever-Glory”), an entity controlled by Mr. Kang, the Company’s Chairman and Chief Executive Officer. The line of credit is also collateralized by the Company’s property and equipment. As of ~~June~~September 30, 2013, Goldenway had borrowed ~~$8.08~~$8.13 million (RMB50 million) under this line of credit from Nanjing Bank with an annual interest rate ofranging from 5.88% to 6.16% and due on various dates from ~~July~~October 2013 to ~~October 2013.~~March 2014. Approximately ~~$1.61~~$1.63 million (RMB10 million) was repaid subsequent to ~~June~~September 30, ~~2013..~~2013.

On ~~May 11, 2012,~~June 14, 2013, Ever-Glory Apparel entered into a line of credit agreement for approximately ~~$9.70~~$9.77 million (RMB60 million) with Nanjing Bank and guaranteed by Jiangsu Ever-Glory. As of ~~June~~September 30, 2013, Ever-Glory Apparel had borrowed ~~$3.23~~$3.25 million (RMB 20 million) under this line of credit with an annual interest ~~rate ranging~~rates from 5.88% to ~~6.3%~~6.6% and due ~~on July 2013.~~ from January to September 2014. Ever-Glory Apparel had also borrowed ~~$1.15~~$4.52 million from Nanjing Bank with an annual interest ~~rate of 2.28%,~~rates ranging from 2.1% to 2.2% and due ~~in July~~on various dates from October to December 2013, and collateralized by approximately ~~$1.7~~$6.46 million of accounts receivable from wholesale customers. At ~~June~~September 30, 2013, approximately ~~$5.32~~$2.0 million was unused and available under this line of credit. Approximately ~~$4.38~~$1.67 million was repaid subsequent to ~~June~~September 30, 2013.

On April 10, 2012, LA GO GO entered into a revolving line of credit agreement with Nanjing Bank, which allows the Company to borrow up to approximately ~~$3.23~~$3.25 million (RMB20 million). The line of credit is guaranteed by Jiangsu Ever-Glory and Mr. Kang. As of ~~June~~September 30, 2013, LA GO GO had borrowed ~~$1.62 million~~$1.63million (RMB10 million) under this line of credit with annual interest rates ranging from ~~6.29%~~6.16% to 6.44% and due on various dates from ~~September~~October 2013 to ~~October 2013.~~January 2014. At ~~June~~September 30, 2013, approximately ~~$1.61~~$1.62 million (RMB10 million) was unused and available under this line of credit. Approximately $0.81 million was repaid subsequent to September 30, 2013.

On January 4, 2011, Goldenway entered into a revolving line of credit agreement for approximately ~~$6.46~~$6.5 million (RMB40 million) with Shanghai Pudong Development Bank. As of ~~June~~September 30, 2013, Goldenway had borrowed the maximum amount available under the line of ~~$6.46~~$6.50 million (RMB40 million), with an annual interest rate of 6.3%. These loans are collateralized by certain properties and land use rights of Goldenway, and are due in November 2013.

As of ~~June~~September 30, 2013, Ever-Glory Apparel had borrowed ~~$6.62~~$5.2 million ~~(RMB 41~~(RMB32 million) from the Bank of Communications with an annual interest rate ~~ranging from 5.6% to~~of 6.3% and due ~~on various dates from October 2013 to~~in February 2014. The loan is guaranteed by Jiangsu Ever-Glory and Mr. Kang. This loan is also collateralized by assets of Jiangsu Ever-Glory’s equity investee, Nanjing Knitting, under a collateral agreement executed among the Company, Jiangsu Ever-Glory, Nanjing Knitting and the bank. Ever-Glory Apparel had also borrowed ~~$2.27~~$2.95 million from the Bank of Communications with an annual interest rate of 3.4%, due on various dates from ~~July~~October to ~~September~~December 2013, and collateralized by approximately ~~$5.2~~$4.2 million of accounts receivable from wholesale customers.

As of ~~June~~September 30, 2013, LA GO GO had borrowed ~~$0.81~~$1.62 million ~~(RMB5~~(RMB10 million) from the Bank of Communications with an annual interest rate of ~~6.06%~~6.3% and due in July ~~2013.~~2014. This loan is guaranteed by Jiangsu Ever-Glory and Mr. Kang. ~~Approximately $0.81 million (RMB5 million) was repaid subsequent to June 30, 2013.~~

On July 29, 2011, Ever-Glory Apparel and Perfect Dream collectively entered into a secured banking facility agreement for a combined revolving import facility, letter of credit, invoice financing facilities and a credit line for treasury products of up to $7.0 million with the Nanjing Branch of HSBC (China) Company Limited (“HSBC”). This agreement is guaranteed by the Company and Mr. Kang. As of ~~June~~September 30, 2013, Ever-Glory Apparel had borrowed ~~$2.42~~$5.4 million ($0.6 million and RMB 30 million) from HSBC with annual interest ~~rate of~~rates ranging 5.6%, to 5.88% and due on various dates from ~~July~~October to ~~August~~December 2013, and collateralized by approximately ~~$4.5~~$7.7 million of accounts receivable from international wholesale customers. These bank loans are to be repaid upon receipt of payments from customers. As of ~~June~~September 30, 2013, approximately ~~$4.58~~$1.6 million was unused and available. Approximately ~~$1.62~~$2.39 million was repaid subsequent to ~~June~~September 30, 2013.

On August 21, 2012, Ever-Glory Apparel entered into a line of credit agreement for approximately $13.41 million (RMB83 million) with Everbright Bank guaranteed by Jiangsu Ever-Glory and Mr. Kang. The line of credit is also collateralized by assets of Jiangsu Ever-Glory under a collateral agreement executed among the Company, Jiangsu Ever-Glory and the bank. As of ~~June~~September 30, 2013, Ever-Glory Apparel had borrowed $3.23 million (RMB20 million) from Everbright Bank, with annual interest rate of 6.3% and due in September 2013. At June 30, 2013, approximately $10.18 million (RMB63 million) was unused and available under this line of credit.

~~As of June 30, 2013, Ever-Glory Apparel had borrowed $1.06~~$2.75 million from China Minsheng Bank, with annual interest rate of 2.93% and due in ~~September~~November 2013 and collateralized by approximately ~~$1.6~~$3.9 million of accounts receivable from wholesale customers.

~~On November 16, 2012,~~As of September 30, 2013, LA GO GO had borrowed $3.25 million (RMB 20 million) from China Minsheng Bank, with annual interest rate of 6.3% and due in August 2014. This loan is guaranteed by Ever-Glory Apparel ~~entered into a line of credit agreement for approximately $4.20 million (RMB26 million) with Bank of China guaranteed by Jiangsu Ever-Glory~~ and Mr. Kang. ~~The line of credit is also collateralized by assets of Jiangsu Ever-Glory under a collateral agreement executed among the Company, Jiangsu Ever-Glory and the bank.~~

As of ~~June~~September 30, 2013, Ever-Glory Apparel had borrowed $1.62 million (RMB 10 million) under this line of credit with annual interest rate of 6.05% and due on December 2013. Ever-Glory Apparel had also borrowed $4.05 million (including $1.79 million and RMB14 million) from Bank of China with an annual interest rate ranging from 1.8% to 6.72%, due on various dates from July to September 2013, and collateralized by approximately $7.2 million of accounts receivable from wholesale customers. Approximately $0.4 million was repaid subsequent to June 30, 2013.

~~As of June 30, 2013, Ever-Glory Apparel had borrowed $0.57~~$1.46 million from Ping An Bank, with annual interest rate of 6.3%, due in ~~September~~November 2013, and collateralized by approximately ~~$0.72~~$2.09 million of accounts receivable from wholesale customers.

As of ~~June~~September 30, 2013, Ever-Glory Apparel had borrowed ~~$1.62~~$1.63 million (RMB 10 million) from Hua Xia Bank, with annual interest rate of 6.6% and due in April 2014. This loan is guaranteed by Goldenway.

Total interest expense on bank loans amounted to ~~$736,695, $1,528,224, $458,703~~$757,390, $2,285,614, $449,413 and ~~$1,004,744~~$1,454,157 for the three and ~~six~~nine months ended ~~June~~September 30, 2013 and 2012, respectively.

NOTE 6 DERIVATIVE WARRANT LIABILITY

The Company had warrants outstanding to purchase an aggregate of 840,454 shares of Company common stock, which warrants required liability classification because of certain provisions that may have resulted in an adjustment to their exercise price. The warrants expired in June 2013. At the expiration date, the remaining value of the warrants not exercised ($2,000) was reduced to $0. The increase in other income resulting from the decrease in derivative warrant liability was ~~$2,000~~$294,000 for the nine months ended September 30, 2013, and ~~$294,000~~$91,000 and $381,800 for the three and ~~six~~nine months ended ~~June 30, 2013, respectively, and $180,000 and $290,800 for the three and six months ended June~~September 30, 2012, respectively.

NOTE 7 INCOME TAX

~~PRC pre-tax~~

Pre-tax income for the three and ~~six~~nine months ended ~~June~~September 30, 2013 and 2012 was taxable in the following jurisdictions.

	Three months ended					Six months ended						Three months ended						Nine months ended
	June 30,					June 30,						September 30,						September 30,
	2013			2012		2013			2012			2013			2012			2013			2012
PRC	$	2,863,460		$	1,582,335	$	5,548,096		$	3,350,278		$	3,776,280		$	797,928		$	9,324,376		$	4,148,206
Samoa		636,295			882,620		1,462,766			1,713,142			1,045,157			1,565,345			2,507,923			3,278,487
BVI		(1,003	)		26,204		(2,318	)		(38,159	)		862			(10,760	)		(1,456	)		(48,919	)
Others		(3,000	)		181,000		283,918			292,964			(4,918	)		86,028			279,000			378,992
	$	3,495,752		$	2,672,159	$	7,292,462		$	5,318,225		$	4,817,381		$	2,438,541		$	12,109,843		$	7,756,766

The Company’s operating subsidiaries are governed by the Income Tax Law of the PRC concerning Foreign Investment Enterprises and Foreign Enterprises and various local income tax laws (“the Income Tax Laws”).

All PRC subsidiaries are subject to income tax at the 25% statutory rate.

Perfect Dream was incorporated in the British Virgin Islands (BVI), and under the current laws of the BVI dividends and capital gains arising from the Company’s investments in the BVI are not subject to income taxes.

Ever-Glory HK was incorporated in Samoa, and under the current laws of Samoa has no liabilities for income ~~tax under the current laws of Samoa.~~taxes.

The following table reconciles the PRC statutory rates to the Company’s effective tax rate for the three and ~~six~~nine months ended ~~June~~September 30, 2013 and 2012, respectively:

	Three months ended						Six months ended						Three months ended						Nine months ended
	June 30,						June 30,						September 30,						September 30,
	2013			2012			2013			2012			2013			2012			2013			2012
PRC statutory rate		25.0	%		25.0	%		25.0	%		25.0	%		25.0	%		25.0	%		25.0	%		25.0	%
Non-taxable or non-deductible items		-			(2.3	)		(1.4	)		(1.9	)
Non-taxable items														-			(1.3	)		(0.8	)		(1.7	)
Effect of foreign income tax rates		(4.5	)		(8.5	)		(5.0	)		(7.9	)		(5.4	)		(15.9	)		(5.2	)		(10.4	)
Other		1.5			(2.2	)		1.7			0.7			(0.2	)		(1.0	)		0.9			0.1
Effective income tax rate		22.0	%		12.0	%		20.3	%		15.9	%		19.4	%		6.8	%		19.9	%		13.0	%

Income tax expense for the three and ~~six~~nine months ended ~~June~~September 30, 2013 and 2012 is as follows:

	Three months ended				Six months ended				Three months ended						Nine months ended
	June 30,				June 30,				September 30,						September 30,
	2013		2012		2013		2012		2013			2012			2013		2012
Current	$	626,528	$	121,988	$	855,572	$	265,092	$	1,022,641		$	236,978		$	1,878,213	$	502,070
Deferred		142,013		199,022		622,600		580,774		(88,708	)		(72,369	)		533,892		508,405
Income tax expense	$	768,541	$	321,010	$	1,478,172	$	845,866	$	933,933		$	164,609		$	2,412,105	$	1,010,475

NOTE 8 EARNINGS PER SHARE

The following demonstrates the calculation for earnings per share for the three and ~~six~~nine months ended ~~June~~September 30, 2013 and 2012:

	Three months ended				Six months ended				Three months ended				Nine months ended
	June 30,				June 30,				September 30,				September 30,
	2013		2012		2013		2012		2013		2012		2013		2012
Net income	$	2,727,211	$	2,351,149	$	5,814,290	$	4,472,359	$	3,883,448	$	2,273,932	$	9,697,738	$	6,746,291
Weighted average number of common shares –Basic and diluted		14,777,610		14,765,942		14,775,869		14,763,815		14,779,268		14,765,942		14,777,015		14,765,568
Earnings per share –Basic and diluted	$	0.18	$	0.16	$	0.39	$	0.30	$	0.26	$	0.15	$	0.66	$	0.46

For three and ~~six~~nine months ended ~~June~~September 30, 2012, the Company excluding 840,454 warrants outstanding from diluted earnings per share as they were ~~anticipative.~~antidilutive.

NOTE 9 STOCKHOLDERS’ EQUITY

On February 28, 2013, the Company issued an aggregate of 5,340 shares of its common stock to three of the Company’s independent directors as compensation for their services in the third and fourth quarters of 2012. The shares were valued at $1.89 per share, which was the average market price of the common stock for the five days before the grant date.

On August 19, 2013, the Company issued an aggregate of 3,631 shares of its common stock to three of the Company’s independent directors as compensation for their services in the first and second quarters of 2013. The shares were valued at $2.73 per share, which was the average market price of the common stock for the five days before the grant date.

NOTE 10 RELATED PARTY TRANSACTIONS

Mr. Kang is the Company’s Chairman and Chief Executive Officer. Ever-Glory Enterprises (H.K.) Ltd. (“Ever-Glory Enterprises”) is the Company’s major shareholder. Mr. Xiaodong Yan is Ever-Glory Enterprises’ sole shareholder. All transactions associated with the following companies controlled by Mr. Kang or Mr. Yan are considered to be related party transactions, and it is possible that the terms of these transactions may not be the same as those that would result from transactions between unrelated parties. All related party outstanding balances are ~~short-tem~~short-term in nature and are expected to be settled in cash.

Other income from Related Parties

Included in other income for the three and ~~six~~nine months ended ~~June~~September 30, 2013 and 2012 is rent revenue from entities controlled by Mr. Kang under operating lease agreements with various terms ~~though 2015~~ as follows:

	Three months ended				Six months ended				Three months ended				Nine months ended
	June 30,				June 30,				September 30,				September 30,
	2013		2012		2013		2012		2013		2012		2013		2012
EsCeLav	$	3,056	$	2,969	$	6,038	$	5,933	$	3,001	$	2,949	$	9,039	$	8,882
Nanjing Eight-One-Five Hi-tech (M&E) Co.,Ltd.		4,070		3,952		8,050		7,905
Nanjing Eight-One-Five Hi-Tech (M&E) Co.,Ltd.										4,003		3,938		12,053		11,843
Total	$	7,126	$	6,921	$	14,088	$	13,838	$	7,004	$	6,887	$	21,092	$	20,725

Other expenses due to Related Parties

Included in other expenses for the three and ~~six~~nine months ended ~~June~~September 30, 2013 and 2012 are rent costs due to entities controlled by Mr. Kang under operating lease agreements as follows:

	Three months ended				Nine months ended
	September 30,				September 30,
	2013		2012		2013		2012
Jiangsu Ever-Glory	$	12,568	$	12,363	$	37,845	$	37,185
Kunshan Enjin		8,247		6,531		25,021		19,668
Total	$	20,815	$	18,894	$	62,866	$	56,853

Three months ended Six months ended
June 30, June 30,
2013 2012 2013 2012
Jiangsu Ever-Glory $ 12,788 $ 12,403 $ 25,277 $ 24,822
Kunshan Enjin 8,517 6,569 16,774 13,137
Total $ 21,305 $ 18,972 $ 42,051 $ 37,959

Purchases from, and Sub-contracts with Related Parties

~~For the three and six months ended June 30, 2013 and 2012, the~~The Company purchased raw materials of ~~$101,370, $184,608, $79,413, $714,022,~~$911,977 and $309,070 during the three months ended September 30, 2013 and 2012, respectively; and $1,096,585 and $1,023,092 during the nine months ended September 30, 2013 and 2012, respectively, from Nanjing Knitting.

The Company purchased raw materials of $34,509 during the three and nine months ended September 30, 2013, from Jiangsu Ever-Glory.

In addition, the Company sub-contracted certain manufacturing work to related parties totaling ~~$5,102,919, $9,088,426, $2,597,793, $5,423,363~~$6,242,241 and $1,587,404 for the three ~~and six~~ months ended ~~June~~September 30, 2013 and 2012, respectively; and $15,330,667 and $7,010,767 for the nine months ended September 30, 2013 and 2012, respectively. The Company provided raw materials to the sub-contractors and was charged a fixed fee for labor provided by the sub-contractors.

Sub-contracts with related parties included in cost of sales for the three and ~~six~~nine months ended ~~June~~September 30, 2013 and 2012 are as follows:

	Three Months Ended June 30,				Six Months Ended June 30,				Three Months Ended September 30,				Nine Months Ended September 30,
	2013		2012		2013		2012		2013		2012		2013		2012
Nanjing Knitting	$	211,296	$	119,159	$	232,602	$	753,768
Nanjing Ever-Kyowa		255,893		246,417		523,878		411,634
Ever-Glory Vietnam		3,175,681		625,667		5,094,787		1,455,136	$	2,268,642	$	887,853	$	7,363,429	$	2,342,989
Ever-Glory Cambodia		1,446,661		1,594,778		3,221,188		2,781,291		3,730,538		483,225		6,951,726		3,264,516
EsCeLav		1,775		6,616		4,358		12,564
Nanjing Ever-Kyowa										211,501		195,992		735,379		607,626
Jiangsu Ever-Glory		11,613		5,156		11,613		8,970		29,929		16,958		41,542		25,928
	$	5,102,919	$	2,597,793	$	9,088,426	$	5,423,363
EsC'eLav										1,631		3,376		5,989		15,940
Nanjing Knitting										-		-		232,602		753,768
Total									$	6,242,241	$	1,587,404	$	15,330,667	$	7,010,767

Accounts Payable – Related Parties

The Company purchases raw materials from and subcontracts some of its production to related parties. Accounts payable to related parties at ~~June~~September 30, 2013 and December 31, 2012 are as follows:

Amounts Due From Related ~~Party~~Parties

Jiangsu Ever-Glory is an entity engaged in importing/exporting, apparel-manufacture, real-estate development, car sales and other activities. Jiangsu Ever-Glory is controlled by Mr. Kang. Because of restrictions on its ability to directly import and export products, the Company had utilized Jiangsu Ever-Glory as its agent to assist the Company with its import and export transactions and its international transportation projects since 2005. Import transactions primarily consist of purchases of raw materials and accessories designated by the Company’s customers for use in garment manufacture. Export transactions consist of the Company’s sales to foreign markets such as Japan, Europe and the United States. These transactions ceased at end of 2011.

In March 2012, in consideration of the guarantees and collateral provided by Jiangsu Ever-Glory and Nanjing Knitting, the Company agreed to provide Jiangsu Ever-Glory a counter guarantee in the form of cash of not less than 70% of the maximum aggregate lines of credit obtained by the Company. Jiangsu Ever-Glory is obligated to return the full amount of the counter-guarantee funds provided upon expiration or termination of the underlying lines of credit and is to pay annual interest at the rate of 6.0% of amounts provided. As of ~~June~~September 30, 2013, Jiangsu Ever-Glory has provided guarantees for approximately ~~$45.4~~$45.7 million (RMB 281 million) of lines of credit obtained by the Company. Jiangsu Ever-Glory, and its 20.31% owned equity investee, Nanjing Knitting, have also provided their assets as collateral for certain of these lines of credit. The value of the collateral, as per appraisals obtained by the banks in connection with these lines of credit is approximately ~~$21.33~~$21.46 million (RMB 132 million). Mr. Kang has also provided a personal guarantee for ~~$22.46~~$22.6 million (RMB 139 million). During the ~~six~~nine months ended ~~June~~September 30, 2013, ~~$7.27~~$7.32 million (RMB45 million) was provided to Jiangsu Ever-Glory under the counter-guarantee. As of ~~June~~September 30, 2013, the amount of the counter-guarantee had been reduced to ~~$21.24~~$21.3 million (RMB131 million), which was 46.7% of the aggregate amount of lines of credit. This amount plus accrued interest of ~~$1.88~~$2.14 million have been classified as a reduction of equity, consistent with the guidance of SEC Staff Accounting Bulletins 4E and 4G.

Interest of 0.5% is charged on net amounts due from Jiangsu Ever-Glory at each month end. Interest income for the three and ~~six~~nine months ended ~~June~~September 30, 2013 and 2012 was approximately ~~$0.34~~$0.26 million, ~~$0.64~~$0.88 million, ~~$0.33~~$0.36 million and ~~$0.61~~$0.92 million, respectively.

Following is a summary of balances at ~~June~~September 30, 2013 and December 31, 2012:

NOTE 11 CONCENTRATIONS AND RISKS

The Company extends unsecured credit to its customers in the normal course of business and generally does not require collateral. As a result, management performs ongoing credit evaluations, and the Company maintains an allowance for potential credit losses based upon its loss history and its aging analysis. Based on management’s assessment of the amount of probable credit losses, if any, in existing accounts receivable, management has concluded that no allowance for doubtful accounts is necessary at ~~June~~September 30, 2013 and December 31, 2012. Management reviews the allowance for doubtful accounts each reporting period based on a detailed analysis of accounts receivable. In the analysis, management primarily considers the age of the customer’s receivable and also considers the credit worthiness of the customer, the economic conditions inof the customer’s industry, and general economic conditions and trends, among other factors. If any of these factors change, the Company may also change its original estimates, which could impact the level of the Company’s future allowance for doubtful accounts. If judgments regarding the collectability of accounts receivables are incorrect, adjustments to the allowance may be required, which would reduce profitability.

For the ~~six-month~~nine-month period ended ~~June~~September 30, 2013, the Company had ~~two~~one wholesale ~~customers~~customer that ~~each~~ represented approximately ~~11%~~10% of the Company’s revenues, and no customer represented more than 10% of the Company’s revenues for the three-month period ended September 30, 2013. For the nine-month period ended September 30, 2012, the Company had one wholesale customer that represented approximately 12% of the Company’s revenues. For the three-month period ended ~~June 30, 2013, the Company had two wholesale customers that represented approximately 14% and 10% of the Company’s revenues respectively, For the six-month period ended June~~September 30, 2012, the Company had two wholesale customers that represented approximately ~~13%~~11% and ~~12%~~10% of the Company’s revenues, respectively. ~~For the three-month period ended June 30, 2012, the Company had two wholesale customers that each represented approximately 11% of the Company’s revenues.~~

For the Company’s wholesale business during the three and ~~six~~nine months ended ~~June~~September 30, 2013 and 2012, no supplier represented more than 10% of the total raw ~~materials purchased.~~material purchases.

For the Company’s retail business, ~~the Company had~~ no supplier ~~that~~ represented ~~more than~~ 10% of raw ~~materials~~material purchases during the ~~six~~nine months ended ~~June~~September 30, 2013. ~~The Company purchased 10% of its raw materials from one supplier during~~During the three months ended ~~June~~September 30, ~~2013. For~~2013, the ~~Company’s retail business, the~~Company relied on two suppliers for 10% and 21% of purchased raw materials, respectively. The Company had one supplier that represented approximately ~~14%~~10% of raw ~~materials~~material purchases during the ~~six~~nine months ended ~~June~~September 30, 2012. ~~The Company purchased 11% and 14% of its raw materials from two suppliers respectively, during~~During the three months ended ~~June~~September 30, ~~2012.~~2012, the Company relied on three suppliers for 11%, 13% and 16% of purchased raw materials, respectively.

For the wholesale business, during the ~~six~~nine months ended ~~June~~September 30, 2013, the Company relied on three manufacturers for 14%, 12% and 12% of purchased finished goods, respectively. During the three months ended September 30, 2013, the Company relied on two manufacturers for 15% and ~~13%~~14% of purchased finished goods, respectively. During the ~~six~~nine months ended ~~June~~September 30, 2012, the Company relied on two manufacturers for ~~17%~~10% and ~~13%~~14% of purchased finished goods, respectively. During the three months ended ~~June~~September 30, ~~2013,~~2012, no supplier represented more than 10% of the ~~Company relied on two manufacturers for 17% and 16% of purchased~~total finished goods ~~respectively. During the three months ended June 30, 2012, the Company relied on two manufacturers for 19% and 16% of purchased finished goods, respectively.~~ purchased.

For the retail business, during the three and ~~six~~nine months ended ~~June~~September 30, 2013 and 2012, no supplier represented more than 10% of the total purchased finished goods.

The Company reports financial and operating information in the following two segments:

(a) Wholesale segment

Wholesale segment Retail segment Total
Six months ended June 30, 2013
Segment profit or loss:
Net revenue from external customers $ 58,711,923 $ 78,729,052 $ 137,440,975
Income from operations $ 5,339,873 $ 2,696,664 $ 8,036,537
Interest income $ 624,195 $ 13,595 $ 637,790
Interest expense $ 1,412,096 $ 116,128 $ 1,528,224
Depreciation and amortization $ 478,315 $ 3,212,576 $ 3,690,891
Income tax expense $ 828,834 $ 649,338 $ 1,478,172
　　　
Six months ended June 30, 2012 　　　
Segment profit or loss: 　　　
Net revenue from external customers $ 59,468,451 $ 40,952,753 $ 100,421,204
Income (loss) from operations $ 4,494,836 $ 690,800 $ 5,185,636
Interest income $ 603,785 $ 6,435 $ 610,220
Interest expense $ 938,754 $ 65,990 $ 1,004,744
Depreciation and amortization $ 498,899 $ 1,798,011 $ 2,296,910
Income tax expense $ 687,462 $ 158,404 $ 845,866
The Company also provides general corporate services to its segments and these costs are reported as "corporate and others."

~~EVER-GLORY INTERNATIONAL GROUP, INC. AND SUBSIDIARIES~~

~~NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~FOR THE THREE MONTHS ENDED JUNE 30, 2013 AND 2012~~

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis of our financial condition and results of operations for the three and ~~six~~nine months ended ~~June~~September 30, 2013 should be read in conjunction with the Financial Statements and corresponding notes included in this Quarterly Report on Form 10-Q. Our discussion includes forward-looking statements based upon current expectations that involve risks and uncertainties, such as our plans, objectives, expectations, and intentions. Actual results and the timing of events could differ materially from those anticipated in these forward-looking statements as a result of a number of factors, including those set forth under the Risk Factors and Special Note Regarding Forward-Looking Statements in this report. We use words such as “anticipate,” “estimate,” “plan,” “project,” “continuing,” “ongoing,” “expect,” “believe,” “intend,” “may,” “will,” “should,” “could,” “target”, “forecast” and similar expressions to identify forward-looking statements.

We are a leading apparel supply-chain manager and retailer in China. We are listed on NYSE MKT (previously NYSE Amex) under the symbol of “EVK”.

We classify our businesses into two segments: Wholesale and Retail. Our wholesale business consists of wholesale-channel sales made principally to famous brands, and department stores located throughout Europe, the U.S., Japan and the People’s Republic of China (“PRC”). We focus on well-known, middle-to-high grade casual wear, sportswear, and outerwear brands. Our retail business consists of retail-channel sales directly to consumers through retail stores located throughout the PRC.

Although we have our own manufacturing facilities, we currently outsource most of the manufacturing to our long-term contractors as part of our overall business strategy. We believe outsourcing allows us to maximize our production capacity and maintain flexibility while reducing capital expenditures and the costs of keeping skilled workers on production lines during low seasons. We oversee our long-term contractors with our advanced management solutions and inspect products manufactured by them to ensure that they meet our high quality control standards and timely delivery.

We conduct our original design manufacturing (“ODM”) operations through ~~six~~five wholly-owned subsidiaries which are located in the Nanjing Jiangning Economic and Technological Development Zone and Shang Fang Town in the Jiangning District in Nanjing, China: Ever-Glory International Group Apparel Inc. (“Ever-Glory Apparel”), Goldenway Nanjing Garments Company Limited (“Goldenway”), Nanjing New-Tailun Garments Company Limited (“New Tailun”), Nanjing Catch-Luck Garments Co., Ltd. (“Catch-Luck”)~~, Ever-Glory International Group (HK) Ltd. (“Ever-Glory HK”),~~ and Nanjing Tai Xin Garments Trading Company Limited (“Tai Xin”). One wholly-owned subsidiary is located in Samoa: Ever-Glory International Group (HK) Ltd. ("Ever-Glory HK").

We conduct our retail operations through Shanghai LA GO GO Fashion Company Limited (“LA GO GO”), a wholly-owned subsidiary of Ever-Glory Apparel.

We believe the enduring strength of our wholesale business is mainly due to our consistent emphasis on innovative and distinctive product designs that stand for exceptional styling and quality.

The primary business objective for our wholesale segment is to expand our portfolio into higher-class brands, expand our customer base and improve our profit. We believe that our growth opportunities and continued investment initiatives include:

●		Expand our global sourcing network

●		Expand our overseas low-cost manufacturing base (outside of mainland China);

●		Focus on high value-added products and continue our strategy to produce mid to high end ~~apparel~~apparel;

●		Continue to emphasize product design and technology ~~utilization.~~utilization;

●		Seek strategic acquisitions of international distributors that could enhance global sales and our distribution network; and

●		Maintain stable revenue increases in the markets while shifting focus to higher margin wholesale markets such as mainland China.

The business objective for our retail segment is to establish a leading brand of women’s apparel and to build a nationwide retail network in China. As of ~~June~~September 30, 2013, we have ~~831~~904 stores (including store-in-stores) which ~~included 127~~include 219 stores that were opened and 2342 stores that were closed ~~in first half of~~during the nine months ended September 30, 2013.

We believe that our growth opportunities and continued investment initiatives include:

●		Build the LA GO GO brand to be recognized as a major player in the mid-end women's apparel market in China;

●		Expand the LA GO GO retail network throughout China;

●		Improve the LA GO GO retail stores’ efficiency and increase same-store ~~sales~~
	sales;
●		Continue to launch LA GO GO flagship stores in Tier-1 Cities and increase penetration and coverage in Tier-2 and Tier-3 ~~Cities~~
	Cities; and
●		Become a multi-brand operator by seeking opportunities for long-term cooperation with reputable international brands and by facilitating international brands entry into the Chinese market.

Seasonality of Business

Our business is affected by seasonal trends, with higher levels of wholesale sales in our third and fourth quarters and higher retail sales in our first and fourth quarters. These trends primarily result from the timing of seasonal wholesale shipments and holiday periods in the retail segment.

For our new overseas customers, we generally require orders placed to be backed by letters of credit. For our long-term and established customers with a good payment track record, we generally provide payment terms between 30 to 180 days following delivery of finished goods.

For store-in-store shops, we generally receive payments from the stores between 60 and 90 days following the date of the register receipt. For our own flagship stores, we receive payments at the time of the register receipt.

Global Economic Uncertainty

Our business is dependent on consumer demand for our products. We believe that the significant uncertainty in the global economy and a slowdown in the United States and European economies have increased our clients’ sensitivity to the cost of our products. We have experienced continued pricing pressure. If the global economic environment continues to be weak or should it weaken, these economic conditions could have a negative impact on our sales growth and operating margins in our wholesale segment in ~~2013.~~2012.

In addition, economic conditions in the United States and other foreign markets in which we operate could substantially affect our sales, and profitability, and our cash position and collection of accounts receivable. Global credit and capital markets have experienced unprecedented volatility and disruption. Business credit and liquidity have tightened in much of the world. Some of our suppliers and customers may face credit issues and could experience cash flow problems and other financial hardships. These factors currently have not had an impact on the timeliness of receivable collections from our customers. We cannot predict at this time how this situation will develop and whether reserve for ~~bad~~doubtful accounts receivable may need to be taken or such receivable written off in the coming quarters.

Despite the various risks and uncertainties associated with the current global economy, we believe our core strengths will continue to allow us to execute our strategy for long-term sustainable growth in revenue, net income and operating cash flow.

Summary of Critical Accounting Policies

We have identified critical accounting policies that, as a result of judgments, uncertainties, uniqueness and complexities of the underlying accounting standards and operation involved could result in material changes to our financial position or results of operations under different conditions or using different assumptions.

We recognize wholesale revenue from product sales, net of value-added taxes, upon delivery for local sales and upon shipment of the products for export sales, at such time title passes to the customer provided ~~however~~ that (i) there are no uncertainties regarding customer acceptance (ii) persuasive evidence of an arrangement exists (iii) the sales price is fixed and determinable, and (iv) collectability is deemed probable. We recognize wholesale revenue from manufacturing fees charged to buyers for the assembly of garments from materials provided by the buyers upon completion of the manufacturing process and shipment of the products for export sales, provided that (i) there are no uncertainties regarding customer acceptance (ii) persuasive evidence of an arrangement exists (iii) the sales price is fixed and determinable, and (iv) collectability is deemed probable. Retail sales are recorded at the time of register receipt.

Estimates and Assumptions

In preparing our consolidated financial statements, we use estimates and assumptions that affect the reported amounts and disclosures. Our estimates are often based on ~~complex~~ judgments, probabilities and assumptions that we believe to be reasonable, but that are inherently uncertain and unpredictable. We are also subject to other risks and uncertainties that may cause actual results to differ from estimated amounts. Significant estimates in 2013 and 2012 include the assumptions used to value warrants and the estimates of the allowance for deferred tax assets.

Results of Operations for the three months ended ~~June~~September 30, ~~2013~~20132 and 2012

The following table summarizes our results of operations for the three months ended ~~June~~September 30, 2013 and 2012. The table and the discussion below should be read in conjunction with our condensed consolidated financial statements and the notes thereto appearing elsewhere in this report.

The following table sets forth a breakdown of our total sales, by region, for the three months ended ~~June~~September 30, 2013 and 2012.

	2013		% of total sales			2012		% of total sales			Growth in 2013compared with 2012			2013		% of total sales		2012		% of total sales		Change in 2013 Compared with 2012
Wholesales business
Wholesale business
The People’s Republic of China	$	8,616,297		14.6	%	$	10,932,971		23.2	%		(21.2	)%	$	24,732,196	23.2	%	$	14,814,519	21.4	%	66.9	%
Germany		3,305,231		5.6			3,393,413		7.2			(2.6	)		5,340,945	5.0			6,358,446	9.2		(16.0	)
United States															4,774,081	4.5			1,816,857	2.6		162.8
United Kingdom		4,961,895		8.4			4,588,231		9.7			8.1			13,138,565	12.3			9,948,373	14.4		32.1
France		2,956,328		5.0			3,049,795		6.5			(3.1	)
Japan															7,537,032	7.1			8,764,281	12.7		(14.0	)
Europe-Other		178,338		0.3			139,760		0.3			27.6			8,648,858	8.1			3,198,985	4.6		170.4
Japan		5,306,554		9.0			2,416,433		5.1			119.6
United States		1,726,825		2.9			4,287,325		9.1			(59.7	)
Total wholesale business		27,051,468		45.7			28,807,928		61.0			(6.1)			64,171,677	60.2			44,901,461	64.8		42.9
Retail business		32,078,017		54.3			18,387,103		39.0			74.5			42,487,842	39.8			24,368,444	35.2		74.4
Total	$	59,129,485		100.0	%	$	47,195,031		100.0	%		25.3	%	$	106,659,519	100.0	%	$	69,269,905	100.0	%	54.0	%

Sales for the three months ended ~~June~~September 30, 2013 were ~~$59.1~~$106.7 million, an increase of ~~25.3%~~54.0% from the three months ended ~~June~~September 30, 2012. This increase was primarily attributable to increased sales in our retail business ~~partially offset for decreased sales in~~as well as our ~~wholesales~~wholesale business.

Sales generated from our wholesale business contributed ~~45.7%~~60.2% or ~~$27.1~~$64.2 million of our total sales for the three months ended ~~June~~September 30, 2013, ~~a decrease~~an increase of ~~6.1%~~42.9% compared to ~~$28.8~~$44.9 million in the three months ended ~~June~~September 30, 2012. This ~~decrease~~increase was primarily attributable to ~~decreased sales in P.R.C, the United States, Germany and France. The reduced~~increased sales in the ~~overseas~~United Kingdom, United States, Europe-Other and the People’s Republic of China. The increased sales in the wholesale segment was primarily due to ~~global economic uncertainty~~following factors: (i) we made more efforts on product development and ~~instability,~~market development; (ii) we enlarged our outsourcing base to Vietnam and Cambodia starting from the ~~advanced economies represented by Europe and the US are recovering slowly,~~third quarter of 2013, which ~~seriously impacted China's apparel exports; therefore,~~significantly increased our ~~overseas wholesale business also faced declining~~ability to process more orders. The domestic fashion consumption was weak due to the slow microeconomic development in China. As the retailers kept to reduce inventory, our domestic wholesale decreased 21.2% compared to the same period last year.

Sales generated from our retail business contributed ~~54.3%~~39.8% or ~~$32.1~~$42.5 million of our total sales for the three months ended ~~June~~September 30, 2013, an increase of ~~74.5%~~74.4% compared to ~~39.0%~~35.2% or ~~$18.4~~$24.4 million in the three months ended ~~June~~September 30, 2012. This increase was primarily due to the increase in same store sales and new stores opened. We had ~~831~~904 LA GO GO stores as of ~~June~~September 30, 2013, compared to ~~562~~644 LA GO GO stores at ~~June~~September 30, 2012.

Cost of Sales and Gross Margin

Cost of ~~goods sold~~sales includes the direct raw material cost, direct labor cost, outsourced production cost and manufacturing overhead including depreciation of production equipment and rent, consistent with the revenue earned. Cost of ~~goods sold~~sales excludes warehousing costs, which historically have not been significant.

The following table sets forth the components of our cost of sales and gross profit both in amounts and as a percentage of total sales for the three months ended ~~June~~September 30, 2013 and 2012.

Growth
(Decrease) in
Three months ended June 30, 2013 Compared
2013 2012 with 2012
(in U.S. dollars, except for percentages)
Net Sales for Wholesale Sales $ 27,051,468 100.0 % $ 28,807,928 100.0 % (6.1 )%
Raw Materials 12,038,807 44.5 13,097,205 45.5 (8.1 )
Labor 1,231,609 4.6 1,137,557 3.9 8.3
Outsourced Production Costs 6,942,002 25.7 7,979,797 27.7 (13.0 )
Other and Overhead 140,929 0.5 22,662 0.1 521.8
Total Cost of Sales for Wholesale 20,353,347 75.2 22,237,221 77.2 (8.5 )
Gross Profit for Wholesale 6,698,121 24.8 6,570,707 22.8 1.9
Net Sales for Retail 32,078,017 100.0 18,387,103 100.0 74.5
Production Costs 9,455,948 29.5 5,212,762 28.4 81.4
Rent 9,841,622 30.7 6,158,467 33.5 59.8
Total Cost of Sales for Retail 19,297,570 60.2 11,371,229 61.8 69.7
Gross Profit for Retail 12,780,447 39.8 7,015,874 38.2 82.2
Total Cost of Sales 39,650,917 67.1 33,608,450 71.2 18.0
Gross Profit $ 19,478,568 32.9 % $ 13,586,581 28.8 % 43.4 %

		Three months ended September 30,								Growth
		2013				2012				In 2013
		(in U.S. dollars, except for percentages)
Net Sales for Wholesale Sales		$	64,171,677	100.0	%	$	44,901,461	100.0	%	42.9	%
Raw Materials			31,856,806	49.7			22,372,864	49.8		42.4
Labor			1,280,475	2.0			1,240,727	2.8		3.2
Outsourced Production Costs			19,891,715	31.0			14,339,488	31.9		38.7
Other and Overhead			144,259	0.2			167,160	0.4		(13.7	)
Total Cost of Sales for Wholesale			53,173,255	82.9			38,120,239	84.9		39.5
Gross Profit for Wholesale			10,998,422	17.1			6,781,222	15.1		62.2
Net Sales for Retail			42,487,842	100.0			24,368,444	100.0		74.4
Production Costs	��		14,573,778	34.3			7,610,338	31.2		91.5
Rent			13,507,655	31.8			8,211,159	33.7		64.5
Total Cost of Sales for Retail			28,081,433	66.1			15,821,497	64.9		77.5
Gross Profit for Retail			14,406,409	33.9			8,546,947	35.1		68.6
Total Cost of Sales			81,254,688	76.2			53,941,736	77.9		50.6
Gross Profit		$	25,404,831	23.8	%	$	15,328,169	22.1	%	65.7	%

Raw material costs for our wholesale business were ~~44.5%~~49.7% of our total wholesale business sales in the three months ended ~~June~~September 30, 2013, a slight decrease compared to ~~45.5%~~49.8% in the three months ended ~~June~~September 30, 2012. ~~The decrease was mainly due to decreased raw materials prices.~~

Labor costs for our wholesale business were ~~4.6%~~2.0% of our total wholesale business sales in the three months ended ~~June~~September 30, 2013, compared to ~~3.9%~~2.8% in the three months ended ~~June~~September 30, 2012. The ~~increase~~marginal decrease was mainly due to the ~~increased average salaries~~fact that we outsourced most of ~~employees.~~the new orders in 2013.

Outsourced manufacturing costs for our wholesale business were ~~25.7%~~31.0% of our total wholesale business sales in the three months ended ~~June~~September 30, 2013, compared to ~~27.7%~~31.9% in the three months ended ~~June~~September 30, 2012. This decrease was primarily attributable to ~~the~~ outsourced orders of approximately ~~$4.6~~$14.3 million to our related ~~factories~~entities in Vietnam and Cambodia, ~~for~~which have lower ~~manufacturing~~labor costs ~~in the three months ended June 30, 2013.~~compared to orders outsourced to Chinese factories.

Overhead and other expenses for our wholesale business accounted for ~~0.5%~~0.2% of our total wholesale business sales for the three months ended ~~June~~September 30, 2013, compared to ~~0.1%~~0.4% of total sales for the three months ended ~~June~~September 30, 2012.

~~Wholesale~~For our wholesale business gross profit for the three months ended ~~June~~September 30, 2013 ~~and 2012~~ was ~~$6.7 and $6.6~~$11.0 million, ~~respectively.~~an increase of 62.2% compared to the three months ended September 30, 2012. As a percentage of wholesale sales, gross profit accounted for ~~24.8%~~17.1% of our total wholesale sales for the three months ended ~~June~~September 30, 2013, an increase of 2.0% compared to ~~22.8%~~15.1% for the three months ended ~~June~~September 30, 2012. The increase was mainly due to decreased ~~raw materials prices and~~ outsourced manufacturing ~~costs.~~costs when more products were manufactured in Vietnam and Cambodia.

Production costs for our retail business were ~~$9.5~~$14.6 million during the three months ended ~~June~~September 30, 2013 compared to ~~$5.2~~$7.6 million during the three months ended ~~June~~September 30, 2012. As a percentage of retail sales, retail production costs accounted for ~~29.5%~~34.3% of our total retail sales in the three months ended ~~June~~September 30, 2013, compared to ~~28.4%~~31.2% of total retail sales in the three months ended ~~June~~September 30, 2012. ~~This increase was primarily due to reduced retail prices in various promotions in exchange for increased sales volume during the three months ended June 30, 2013. .~~

Rent costs for our retail business were ~~$9.8~~$13.5 million for the three months ended ~~June~~September 30, 2013 compared to ~~$6.2~~$8.2 million for the three months ended ~~June~~September 30, 2012. As a percentage of sales, rent costs accounted for ~~30.7%~~31.8% of our total retail sales for the three months ended ~~June~~September 30, 2013, compared to ~~33.5%~~33.7% of total retail sales for the three months ended ~~June~~September 30, 2012. Total rent costs increased as a result of the increase in the number of our stores. The decrease in rent costs as a percentage of total retail sales was due to an increase in same store sales in 2013.

Gross profit in our retail business for the three months ended ~~June~~September 30, 2013 was ~~$12.8~~$14.4 million and gross margin was ~~39.8%~~33.9%. Gross profit in our retail business for the three months ended ~~June~~September 30, 2012 was ~~$7.0~~$8.5 million and gross margin was ~~38.2%~~35.1%. The decrease in gross margin by 1.2% was primarily due to reduced retail prices in various promotions in exchange for increased sales volume during the three months ended September 30, 2013.

Total cost of sales for the three months ended ~~June~~September 30, 2013 was ~~$39.7~~$81.3 million, compared to ~~$33.6~~$53.9 million for the three months ended ~~June~~September 30, 2012, an increase of ~~18.0%~~50.6%. As a percentage of total sales, cost of sales decreased to ~~67.1%~~76.2% of total sales for the three months ended ~~June~~September 30, 2013, compared to ~~71.2%~~77.9% of total sales for the three months ended ~~June~~September 30, 2012. Consequently, gross margin increased to ~~32.9%~~23.8% for the three months ended ~~June~~September 30, 2013 from ~~28.8%~~22.1% for the three months ended ~~June~~September 30, 2012.

Selling, General and Administrative Expenses

Our selling expenses consist primarily of local transportation, unloading charges, product inspection charges, salaries for retail staff and decoration and marketing expenses associated with our retail business.

Our general and administrative expenses include administrative salaries, office expense, certain depreciation and amortization charges, repairs and maintenance, legal and professional fees, warehousing costs and other expenses that are not directly attributable to our revenues.

Costs of our distribution network that are excluded from cost of sales consist of local transportation and unloading charges, and product inspection charges. Accordingly our gross profit amounts may not be comparable to those of other companies who include these amounts in cost of sales.

Three Months Ended June 30, Increase/
2013 2012 (Decrease)
(in U.S. Dollars, except for percentages)
Gross Profit $ 19,478,568 32.9 % $ 13,586,581 28.8 % 43.4 %
Operating Expenses: 　　　
Selling Expenses 9,898,106 16.7 6,966,335 14.8 42.1
General and Administrative Expenses 5,513,105 9.3 4,198,130 8.9 31.3
Total 15,411,211 26.0 11,164,465 23.7 38.0
Income from Operations $ 4,067,357 6.9 % $ 2,422,116 5.1 % 67.9 %

	Three Months Ended September 30,								Increase
	2013				2012				(decrease)
	(in U.S. Dollars, except for percentages)
Gross Profit	$	25,404,831	23.8	%	$	15,328,169	22.1	%		65.7	%
Operating Expenses:
Selling Expenses		14,249,753	13.3	%		8,608,695	12.4			65.5
General and Administrative Expenses		6,684,580	6.3	%		4,152,162	6.0			61.0
Total		20,934,333	19.6	%		12,760,857	18.4			64.1
Income from Operations	$	4,470,498	4.2	%	$	2,567,312	3.7	%		74.1	%

Selling expenses increased ~~42.1%~~65.5% to ~~$9.9~~$14.2 million for the three months ended ~~June~~September 30, 2013 from ~~$7.0~~$8.6 million for the three months ended ~~June~~September 30, 2012. As a percentage of total sales, selling expenses increased to 13.3% of total sales for the three months ended September 30,2013, compared to 12.4% of total sales for the three months ended September 30,2012. The increase was attributable to the increased number of retail employees and increased average salaries, as well as increased store decoration and marketing expenses associated with the promotion of the LA GO GO brand.

General and administrative expenses increased ~~31.3%~~61.0% to ~~$5.5~~$6.7 million ~~for~~ the three months ended ~~June~~September 30, 2013 from $4.2 million for the three months ended ~~June~~September 30, 2012. As a percentage of total sales, general and administrative expenses increased to ~~9.3%~~6.3% of total sales for the three months ended ~~June~~September 30, 2013, compared to ~~8.9%~~6.0% of total sales for the three months ended ~~June~~September 30, 2012. The increase was attributable to an increase in ~~payroll for additional~~the number of wholesale and retail management ~~and design and marketing staff as a result of our business expansion.~~personnel.

Income from Operations

Income from operations increased ~~67.9%~~74.1% to ~~$4.1~~$4.5 million for the three months ended ~~June~~September 30, 2013 from ~~$2.4~~$2.6 million for the three months ended ~~June~~September 30, 2012. As a percentage of sales, income from operations accounted for ~~6.9%~~4.2% of our total sales for the three months ended ~~June~~September 30, 2013, an increase of ~~1.8%~~0.5% compared to the three months ended ~~June~~September 30, 2012 as a result of increasing gross profit.

Interest Expense

Interest expense was ~~$0.7~~$0.76 million for the three months ended ~~June~~September 30, 2013, an increase of ~~60.6%~~68.5% compared to the same period in 2012. ~~This~~The increase was ~~attributable~~due to the increased ~~interest rates and loan amounts.~~bank loans as a result of our business expansion.

Change in fair value of derivative liability

Change in fair value of derivative liability was a gain of ~~$0.002~~$0 million and ~~$0.2~~$0.1 million, based on the Binnomial Lattice model, for the three months ended ~~June~~September 30, 2013 and 2012, respectively. The warrants expired in June 2013. At the expiration date, the remaining value of the warrants not exercised was reduced to $0.

Income Tax Expenses

Income tax expense for the three months ended ~~June~~September 30, 2013 was ~~$0.8~~$0.9 million, an increase of ~~139%~~467.4% compared to the same period of 2012. The increase was primarily due to increased profits of Taixin and LA GO GO.

Our PRC subsidiaries are governed by the Income Tax Law of the PRC concerning Foreign Investment Enterprises and Foreign Enterprises and various local income tax laws. Each of our consolidated entities files its own separate income tax return.

All PRC subsidiaries are subject to the 25% income tax rate.

Perfect Dream Limited was incorporated in the British Virgin Islands on July 1, 2004, and has no income tax.

Ever-Glory International Group (HK) Ltd was incorporated in Samoa on September 15, 2009, and has no liabilities for income tax.

Ever-Glory International Group Inc. was incorporated in the United States and has incurred net operating losses for income tax purposes through ~~2011.~~2012. The net operating loss carry forwards for United States income taxes may be available to reduce future years’ taxable income. These carry forwards will expire, if not utilized, through ~~2031.~~2032. Management believes that the realization of the benefits from these losses is uncertain due to our limited operating history and continuing losses for United States income tax purposes. Accordingly, we provided a 100% valuation allowance on the deferred tax asset to reduce the asset to zero.

Net Income

Net income for the three months ended ~~June~~September 30, 2013 was ~~$2.7~~$3.9 million, an increase of ~~16%~~70.8% compared to the same period in 2012. Our basic and diluted earnings per share were ~~$0.18~~$0.26 and ~~$0.16~~$0.15 for the three months ended ~~June~~September 30, 2013 and 2012, respectively.

Results of Operations for the ~~six~~nine months ended ~~June~~September 30, 2013 and 2012

The following table summarizes our results of operations for the ~~six~~nine months ended ~~June~~September 30, 2013 and 2012. The table and the discussion below should be read in conjunction with the consolidated financial statements and the notes thereto appearing elsewhere in this report.

Six Months Ended June 30,
2013 2012
(in U.S. Dollars, except for percentages)
Sales $ 137,440,975 100.0 % $ 100,421,204 100.0 %
Gross Profit 39,771,491 28.9 25,189,569 25.1
Operating Expense 31,734,954 23.1 20,003,933 19.9
Income From Operations 8,036,537 5.8 5,185,636 5.2
Other Income (Expenses) (744,075 ) 0.5 (132,589 ) 0.1
Income tax expense 1,478,172 1.1 845,866 0.8
Net Income $ 5,814,290 4.2 % $ 4,472,359 4.5 %

	Nine Months Ended September 30,
	2013				2012
	(in U.S. Dollars, except for percentages)
Sales	$	244,100,494	100.0	%	$	169,691,109		100.0	%
Gross Profit	$	65,176,322	26.7	%	$	40,517,738		23.9	%
Operating Expense	$	52,669,287	21.6	%	$	32,764,790		19.3	%
Income From Operations	$	12,507,035	5.1	%	$	7,752,948		4.6	%
Other Expenses (Income)	$	397,192	0.1	%	$	(3,818	)	0.0	%
Income tax expense	$	2,412,105	1.0	%	$	1,010,475		0.6	%
Net Income	$	9,697,738	4.0	%	$	6,746,291		4.0	%

Revenue

The following table sets forth a breakdown of our total sales, by region, for the ~~six~~nine months ended ~~June~~September 30, 2013 and 2012.

	2013		% of total sales			2012		% of total sales			Growth in 2013compared with 2012			2013		% of total sales			2012		% of total sales			Change In 2013
Wholesales business
Wholesale business
The People’s Republic of China	$	21,647,361		15.8	%	$	18,875,802		18.8	%		14.7	%	$	46,379,556		19.0	%	$	33,690,321		19.9	%		37.7	%
Germany		7,676,564		5.6			8,858,106		8.8			(13.3	)		13,017,509		5.3			15,216,552		9.0			(14.5	)
United States															10,227,881		4.2			9,320,440		5.5			9.7
United Kingdom		7,826,529		5.7			7,953,390		7.9			(1.6	)		20,965,094		8.6			17,901,763		10.5			17.1
France		6,369,316		4.6			7,139,555		7.1			(10.8	)
Japan															16,542,420		6.8			17,287,863		10.2			(4.3	)
Europe-Other		732,965		0.5			614,433		0.6			19.3			15,751,139		6.4			10,952,973		6.4			43.8
Japan		9,005,388		6.6			8,523,582		8.5			5.7
United States		5,453,800		4.0			7,503,583		7.5			(27.3	)
Total wholesale business		58,711,923		42.7			59,468,451		59.2			(1.3	)		122,883,599		50.3			104,369,912		61.5			17.7
Retail business		78,729,052		57.3			40,952,753		40.8			92.2			121,216,895		49.7			65,321,197		38.5			85.6
Total	$	137,440,975		100.0	%	$	100,421,204		100.0	%		36.9	%	$	244,100,494		100.0	%	$	169,691,109		100.0	%		43.8	%

Sales for the ~~six~~nine months ended ~~June~~September 30, 2013 were ~~$137.4~~$244.1 million, an increase of ~~36.9%~~43.8% from the ~~six~~nine months ended ~~June~~September 30, 2012. This increase was primarily attributable to increased sales in our retail business as well as our wholesale business.

Sales generated from our wholesale business contributed ~~42.7%~~50.3% or ~~$58.7~~$122.9 million of our total sales for the ~~six~~nine months ended ~~June~~September 30, 2013, ~~a decrease~~an increase of ~~1.3%~~17.7% compared to ~~$59.5~~$104.4 million in the ~~six~~nine months ended ~~June~~September 30, 2012. This ~~decrease~~increase was primarily attributable to ~~decreased~~increased sales orders in ~~Germany,~~ the United Kingdom, United States, ~~and France. The reduced sales in the overseas wholesale segment was primarily due to global economic uncertainty and instability, the developed economies represented by Europe~~Europe-Other and the ~~US are recovering slowly, which seriously impacted China's apparel exports; as a result, our overseas wholesale business also faced declining orders.~~People’s Republic of China.

Sales generated from our retail business contributed ~~57.3%~~49.7% or ~~$78.7~~$121.2 million of our total sales for the ~~six~~nine months ended ~~June~~September 30, 2013, an increase of ~~92.2%~~85.6% compared to ~~40.8%~~38.5% or ~~$41.0~~$65.3 million in the ~~six~~nine months ended ~~June~~September 30, 2012. This increase was primarily due to the increase in same store sales and new stores opened. We had ~~831~~904 LA GO GO stores as of ~~June~~September 30, 2013, compared to ~~562~~644 LA GO GO stores at ~~June~~September 30, 2012.

Total retail store square footage and sales per square foot for the ~~six~~nine months ended ~~June~~September 30, 2013 and 2012 are as follows:

	2013		2012		2013		2012
Total store square footage		754,870		489,444		836,023		565,701
Number of stores		831		562		904		644
Average store size, square feet		908		871		925		878
Total store sales	$	78,729,052	$	40,952,753	$	121,216,895	$	65,321,197
Sales per square foot	$	104	$	84	$	145	$	115

Same store sales and newly opened store sales for the ~~six~~nine months ended ~~June~~September 30, 2013 and 2012 are as follows:

	2013		2012		2013		2012
Sales from stores open a full year	$	49,510,906	$	24,508,726	$	87,912,225	$	47,206,937
Newly opened store sales		26,054,394		14,133,718		27,617,747		14,926,667
Other*		3,163,752		2,310,309		5,686,923		3,187,593
Total	$	78,729,052	$	40,952,753	$	121,216,895	$	65,321,197

*Primarily *Primarily sales from stores that were closed in the current reporting period.

We remodeled or relocated 119 stores in 2012, and we plan to relocate or remodel 200 stores in 2013. Remodels and relocations typically drive incremental same-store sales growth. A relocation typically results in an improved, more visible and accessible location, and usually includes increased square footage. We believe we will continue to have opportunities for additional remodels and relocations beyond 2013. Same-store sales are calculated based upon stores that were open at least 12 full fiscal months in each reporting period and remain open at the end of each reporting period.

Costs and Expenses

Cost of Sales and Gross Margin

The following table sets forth the components of our cost of sales and gross profit both in amounts and as a percentage of total sales for the ~~six~~nine months ended ~~June~~September 30, 2013 and 2012.

									Growth
									(Decrease) in
	Six months ended June 30,								2013 compared			Nine months ended September 30,								Growth (Decrease)
	2013				2012				with 2012			2013				2012				In 2013
	(in U.S. dollars, except for percentages)											(in U.S. dollars, except for percentages)
Net Sales for Wholesale Sales	$	58,711,923	100.0	%	$	59,468,451	100.0	%		(1.3	)%	$	122,883,599	100.0	%	$	104,369,912	100.0	%		17.7	%
Raw Materials		26,041,183	44.4			27,333,840	46.0			(4.7	)		57,897,989	47.1			49,706,704	47.6			16.5
Labor		2,287,662	3.9			2,046,295	3.4			11.8			3,568,137	2.9			3,287,022	3.1			8.6
Outsourced Production Costs		16,896,224	28.8			17,620,323	29.6			(4.1	)		36,787,939	29.9			31,959,810	30.6			15.1
Other and Overhead		271,514	0.5			253,413	0.4			7.1			415,772	0.4			420,575	0.4			(1.1	)
Total Cost of Sales for Wholesale		45,496,583	77.5			47,253,871	79.5			(3.7	)		98,669,837	80.3			85,374,111	81.8			15.6
Gross Profit for Wholesale		13,215,340	22.5			12,214,580	20.5			8.2			24,213,762	19.7			18,995,801	18.2			27.5
Net Sales for Retail		78,729,052	100.0			40,952,753	100.0			92.2			121,216,895	100.0			65,321,197	100.0			85.6
Production Costs		24,512,666	31.1			13,081,846	31.9			87.4			39,086,444	32.2			20,692,184	31.7			88.9
Rent		27,660,235	35.1			14,895,918	36.4			85.7			41,167,891	34.0			23,107,077	35.4			78.2
Total Cost of Sales for Retail		52,172,901	66.3			27,977,764	68.3			86.5			80,254,335	66.2			43,799,261	67.1			83.2
Gross Profit for Retail		26,556,151	33.7			12,974,989	31.7			104.7			40,962,560	33.8			21,521,936	32.9			90.3
Total Cost of Sales		97,669,484	71.1			75,231,635	74.9			29.8			178,924,172	73.3			129,173,371	76.1			38.5
Gross Profit	$	39,771,491	28.9	%	$	25,189,569	25.1	%		57.9	%	$	65,176,322	26.7	%	$	40,517,738	23.9	%		60.9	%

Raw material costs for our wholesale business were ~~44.4%~~47.1% of our total wholesale business sales in the ~~six~~nine months ended ~~June~~September 30, 2013, a slight decrease compared to ~~46.0%~~47.6% in the ~~six~~nine months ended ~~June~~September 30, 2012. ~~The decrease was mainly due to decreased raw materials prices.~~

Labor costs for our wholesale business were ~~3.9%~~2.9% of our total wholesale business sales in the ~~six~~nine months ended ~~June~~September 30, 2013, compared to ~~3.4%~~3.1% in the ~~six~~nine months ended ~~June~~September 30, 2012. The ~~increase~~marginal decrease was mainly due to the ~~increased average salaries~~fact that we outsourced most of ~~employees.~~the new orders in 2013.

Outsourced manufacturing costs for our wholesale business were ~~28.8%~~29.9% of our total sales in the ~~six~~nine months ended ~~June~~September 30, 2013 compared to ~~29.6%~~30.6% in the ~~six~~nine months ended ~~June~~September 30, 2012. This decrease was primarily attributable to ~~the~~ outsourced orders of approximately ~~$8.3~~$14.3 million to our related ~~factories~~entities in Vietnam and Cambodia, ~~for~~which have lower ~~manufacturing~~labor costs ~~in the six months ended June 30, 2013.~~compared to orders outsourced to Chinese factories.

Overhead and other expenses for our wholesale business accounted for ~~0.5% and~~ 0.4% of our total wholesale business sales for the ~~six~~nine months ended ~~June~~September 30, 2013, ~~and 2012 respectively.~~compared to 0.4% of total sales for the nine months ended September 30, 2012.

Gross profit in our wholesale business for the ~~six~~nine months ended ~~June~~September 30, 2013 was ~~$13.2~~$24.2 million, an increase of ~~8.2%~~27.5% compared to the ~~six~~nine months ended ~~June~~September 30, 2012. As a percentage of wholesale sales, gross profit accounted for ~~22.5%~~19.7% of our total wholesale sales for the ~~six~~nine months ended ~~June~~September 30, 2013, an increase of ~~2.0%~~1.5% compared to ~~20.5%~~18.2% for the ~~six~~nine months ended ~~June~~September 30, 2012. ~~The increase~~Increase in gross profit was ~~mainly due to decreased raw materials prices~~primarily resulted from reduced outsourced production costs when more products were manufactured in Vietnam and ~~outsourced manufacturing costs.~~Cambodia.

Production costs for our retail business were ~~$24.5~~$39.1 million during the ~~six~~nine months ended ~~June~~September 30, 2013 versus ~~$13.1~~$20.7 million during the ~~six~~nine months ended ~~June~~September 30, 2012. As a percentage of ~~total~~ retail sales, ~~Production~~retail production costs accounted for ~~our retail business were 31.1%~~32.2% of our total retail sales ~~during~~in the ~~six~~Nine months ended ~~June~~September 30, ~~2013, a slight decreased~~2012, compared to ~~31.9% during~~31.7% of total retail sales in the ~~six~~Nine months ended ~~June~~September 30, 2012. This increase was primarily due to increase in manufacturing costs in China.

Rent costs for our retail business were ~~$27.7~~$41.2 million or ~~35.1%~~34.0% of our total retail sales during the ~~six~~nine months ended ~~June~~September 30, 2013 versus ~~$14.9~~$23.1 million or ~~36.4%~~35.4% during the ~~six~~nine months ended ~~June~~September 30, 2012. Total rent costs increased as a result of the increase in the number of our stores. The decrease in rent costs as a percentage of total retail sales was due to an increase in same store sales in 2013.

Gross profit in our retail business for the ~~six~~nine months ended ~~June~~September 30, 2013 was ~~$26.6~~$41.0 million and gross margin was ~~33.7%~~33.8%. Gross profit in our retail business for the ~~six~~nine months ended ~~June~~September 30, 2012 was ~~$13.0~~$21.5 million and gross margin was ~~31.7%~~32.9%. The gross profit increased 90.3% was primarily due to increase in same store sales and reduced rental costs.

Total cost of sales for the ~~six~~nine months ended ~~June~~September 30, 2013 was ~~$97.7~~$178.9 million, an increase of ~~29.8%~~38.5% compared to the ~~six~~nine months ended ~~June~~September 30, 2012. As a percentage of total sales, our cost of sales decreased to ~~71.1%~~73.3% for the ~~six~~nine months ended ~~June~~September 30, 2013, compared to ~~74.9%~~76.1% for the ~~six~~nine months ended ~~June~~September 30, 2012. Consequently, gross margin increased to ~~28.9%~~26.7% for the ~~six~~nine months ended ~~June~~September 30, ~~2013~~2012 from ~~25.1%~~23.9% for the ~~six~~nine months ended ~~June~~September 30, 2012.

We purchase the majority of our raw materials directly from numerous local fabric and accessories suppliers. For our wholesale business, purchases from our five largest suppliers represented approximately ~~22.9%~~18.9% and ~~19.0%~~16.7% of raw material purchases for the ~~six~~nine months ended ~~June~~September 30, 2013 and 2012, respectively. No one supplier provided more than ~~10.0%~~10% of our raw material purchases for the ~~six~~nine months ended ~~June~~September 30, 2013 and 2012. For our retail business, purchases from our five largest suppliers represented approximately ~~31.0%~~34.4% and ~~43.9%~~34.9% of raw material purchases for the ~~six~~nine months ended ~~June~~September 30, 2013 and 2012, respectively. No one supplier provided more than 10% of our ~~total~~raw material purchases for the ~~six~~nine months ended ~~June~~September 30, 2013. One supplier provided ~~13.8%~~10.1% of our total purchases for the ~~six~~nine months ended ~~June~~September 30, 2012. We have not experienced difficulty in obtaining raw materials essential to our business, and we believe we maintain good relationships with our suppliers.

We also purchase finished goods from contract manufacturers. For our wholesale business, purchases from our five largest contract manufacturers represented approximately ~~46.6%~~46.7% and 41.2% of finished goods purchases for the ~~six~~nine months ended ~~June~~September 30, 2013 and ~~2012. Two~~2012, respectively. Three contract manufacturers provided approximately ~~15.4%~~14.0%, 12.3% and ~~13.1%~~11.6% of our finished goods purchases for the ~~six~~nine months ended ~~June~~September 30, 2013. Two contract manufacturers provided approximately ~~16.6%~~14.3% and ~~13.2%~~10% of our finished goods purchases for the ~~six~~nine months ended ~~June~~September 30, 2012. For our retail business, our five largest contract manufacturers represented approximately ~~16.0%~~15.3% and ~~18.5%~~14.6% of finished goods purchases for the ~~six~~nine months ended ~~June~~September 30, 2013 and 2012, respectively. No contract manufacturer provided more than 10% of our retail finished goods purchases for the ~~six~~nine months ended ~~June~~September 30, 2013 and 2012. We have not experienced difficulty in obtaining finished products from our contract manufacturers and we believe we maintain good relationships with our contract manufacturers.

Selling, General and Administrative Expenses

	Six months ended June 30,								Increase			Nine months ended September 30,								Increase
	2013				2012				(Decrease) %			2013				2012				(decrease)
	(in U.S. Dollars, except for percentages)											(in U.S. Dollars, except for percentages)
Gross Profit	$	39,771,491	28.9	%	$	25,189,569	25.1	%		57.9	%	$	65,176,322	26.7	%	$	40,517,738	23.9	%		60.9	%
Operating Expenses:
Selling Expenses		21,749,402	15.8			12,800,527	12.7			69.9			35,999,155	14.8			21,409,222	12.6			68.1
General and Administrative Expenses		9,985,552	7.3			7,203,406	7.2			38.6			16,670,132	6.8			11,355,568	6.7			46.8
Total		31,734,954	23.1			20,003,933	19.9			58.6			52,669,287	21.6			32,764,790	19.3			60.7
Income from Operations	$	8,036,537	5.8	%	$	5,185,636	5.2	%		55.0	%	$	12,507,035	5.1	%	$	7,752,948	4.6	%		61.3	%

Selling expenses were ~~$21.7~~$36.0 million in the ~~six~~nine months ended ~~June~~September 30, 2013, an increase of ~~69.9%~~68.1% or ~~$8.9~~$14.6 million compared to the ~~six~~nine months ended ~~June~~September 30, 2012. As a percentage of total sales, selling expenses increased to 14.8% of total sales for the nine months ended September 30, 2013, compared to 12.6% of total sales for the nine months ended September 30, 2012. The increase was attributable to an increase in salaries and the number of retail staff, as well as increased decoration and marketing expenses associated with the promotion of LA GO GO.

General and administrative expenses were ~~$10.0~~$16.7 million in the ~~six~~nine months ended ~~June~~September 30, 2013, an increase of ~~38.6%~~46.8% compared to the ~~six~~nine months ended ~~June~~September 30, 2012. As a percentage of total sales, general and administrative expenses ~~slightly~~ increased to ~~7.3%~~6.8% of total sales for the ~~six~~nine months ended ~~June~~September 30, 2013, compared to ~~7.2%~~6.7% of total sales for the ~~six~~nine months ended ~~June~~September 30, 2012. The increase was attributable to an increase in the number of Wholesale and retail management personnel.

Income from Operations

Income from operations increased ~~55.0%~~61.3% to ~~$8.0~~$12.5 million for the ~~six~~nine months ended ~~June~~September 30, 2013 from ~~$5.2~~$7.8 million for the ~~six~~nine months ended ~~June~~September 30, 2012. ~~This~~

Income from operations for our wholesale business was $9.1 million in the nine months ended September 30, 2013 compared to $6.8 million in the nine months ended September 30, 2012. As a percentage of total wholesale sales, income from operations increased to 7.4% of total wholesale sales for the nine months ended September 30, 2013, compared to 6.5% of total wholesale sales for the nine months ended September 30, 2012. The increase was due to the increased sales in our ~~increased gross profit.~~wholesale business.

Income from operations for our retail business was ~~$2.7~~$3.4 million in the ~~six~~nine months ended ~~June~~September 30, 2013 compared to ~~$0.7~~$0.9 million in the ~~six~~nine months ended ~~June~~September 30, 2012. As a percentage of total retail sales, income from operations increased to ~~3.4%~~2.8% of total retail sales for the ~~six~~nine months ended ~~June~~September 30, 2013, compared to ~~1.7%~~1.5% of total retail sales for the ~~six~~nine months ended ~~June 30, 2012. The increase was due to increased gross profit in our retail business.~~

Income from operations for our wholesale business was $5.3 million in the six months ended June 30, 2013 compared to $4.5 million in the six months ended June 30, 2012. As a percentage of total wholesale sales, income from operations increased to 9.1% of total wholesale sales for the six months ended June 30, 2013, compared to 7.6% of total wholesale sales for the six months ended JuneSeptember 30, 2012. The increase was due to the ~~decreased cost of~~increased sales ~~for~~in our ~~wholesale~~retail business.

Interest Expense

Interest expense was ~~$1.5~~$2.3 million for the ~~six~~nine months ended ~~June~~September 30, 2013, an increase of ~~52.1%~~57.2% compared to the same period in 2012. ~~This~~The increase was ~~attributable~~due to ~~the~~ increased ~~interest rates and loan amounts.~~bank loans as a result of our business expansion.

Change in fair value of derivative liability

Change in fair value of derivative liability was a gain of ~~$0.29~~$0.30 million and ~~$0.29~~$0.38 million, based on the Binnomial Lattice model, for the ~~six~~nine months ended ~~June~~September 30, 2013 and 2012, respectively. The warrants expired in June 2013. At the expiration date, the remaining value of the warrants not exercised was reduced to $0.

Income Tax Expenses

Income tax expense for the ~~six~~nine months ended ~~June~~September 30, 2013 was ~~$1.5~~$2.4 million, an increase of ~~74.8%~~138.7% compared to the same period of 2012. The increase was primarily due to ~~increase in profit~~increased profits of Taixin and LA GO GO.

Net Income

Net income for the ~~six~~nine months ended ~~June~~September 30, 2013 was ~~$5.8~~$9.7 million, an increase of ~~30.0%~~43.7% compared to the same period in 2012. Our diluted earnings per share were ~~$0.39~~$0.66 and ~~$0.30~~$0.46 for the ~~six~~nine months ended ~~June~~September 30, 2013 and 2012, respectively.

Summary of Cash Flows

Net cash used in operating activities was $0.6 million for the nine months ended September 30, 2013, compared with net cash provided by operating activities ~~was $5.12 million for the six months ended June 30, 2013, compared with $19.2~~of $16.9 million during the ~~six~~nine months ended ~~June~~September 30, 2012. The decrease was primarily due to aan increase in inventories and decrease in ~~amounts due from related parties.~~accounts payable.

Net cash used in investing activities was ~~$4.6~~$6.7 million for the ~~six~~nine months ended ~~June~~September 30, 2013, compared with ~~$2.1~~$5.1 million during the ~~six~~nine months ended ~~June~~September 30, 2012. The increase was mainly due to increased equipment purchases.

Net cash provided by financing activities was ~~$6.1~~$9.2 million for the ~~six~~nine months ended ~~June~~September 30, 2013, compared with net cash used in financing activities of ~~$18.7~~$10.1 million during the ~~six~~nine months ended ~~June~~September 30, 2012. During the ~~six~~nine months ended ~~June~~September 30, 2013, we repaid ~~$45.3~~$78.4 million of bank loans and received bank loan proceeds of ~~$42.2~~$78.5 million. Also, under the counter-guarantee agreement, we advanced $7.2 million to the related party and received ~~$18.8~~$18.7 million from the related party during the ~~six~~nine months ended ~~June~~September 30, 2013.

Liquidity and Capital Resources

As of ~~June~~September 30, 2013, we had cash and cash equivalents of ~~$16.1~~$11.7 million, other current assets of ~~$119.8~~$161.1 million and current liabilities of ~~$108.7~~$142.6 million. We presently finance our operations primarily from cash flows from operations and bank loans and we anticipate that these will continue to be our primary sources of funds to finance our short-term cash needs.

Bank Loans

On ~~May 11, 2012,~~June 14, 2013, Ever-Glory Apparel entered into a line of credit agreement for approximately ~~$9.70~~$9.77 million (RMB60 million) with Nanjing Bank and guaranteed by Jiangsu Ever-Glory. As of ~~June~~September 30, 2013, Ever-Glory Apparel had borrowed ~~$3.23~~$3.25 million (RMB 20 million) under this line of credit with an annual interest ~~rate ranging~~rates from 5.88% to ~~6.3%~~6.6% and due ~~on July 2013.~~from January to September 2014. Ever-Glory Apparel had also borrowed ~~$1.15~~$4.52 million from Nanjing Bank with an annual interest ~~rate of 2.28%,~~rates ranging from 2.1% to 2.2% and due ~~in July~~on various dates from October to December 2013, and collateralized by approximately ~~$1.7~~$6.46 million of accounts receivable from wholesale customers. At ~~June~~September 30, 2013, approximately ~~$5.32~~$2.0 million was unused and available under this line of credit. Approximately ~~$4.38~~$1.67 million was repaid subsequent to ~~June~~September 30, ~~2013..~~2013.

On April 10, 2012, LA GO GO entered into a revolving line of credit agreement with Nanjing Bank, which allows the Company to borrow up to approximately ~~$3.23~~$3.25 million (RMB20 million). The line of credit is guaranteed by Jiangsu Ever-Glory and Mr. Kang. As of ~~June~~September 30, 2013, LA GO GO had borrowed ~~$1.62~~$1.63 million (RMB10 million) under this line of credit with annual interest rates ranging from ~~6.29%~~6.16% to 6.44% and due on various dates from ~~September~~October 2013 to ~~October 2013.~~January 2014. At ~~June~~September 30, 2013, approximately ~~$1.61~~$1.62 million (RMB10 million) was unused and available under this line of credit. Approximately $0.81 million was repaid subsequent to September 30, 2013.

As of ~~June~~September 30, 2013, LA GO GO had borrowed ~~$0.81~~$1.62 million ~~(RMB5~~(RMB10 million) from the Bank of Communications with an annual interest rate of ~~6.06%~~6.3% and due in July ~~2013.~~2014. This loan is guaranteed by Jiangsu Ever-Glory and Mr. Kang. ~~Approximately $0.81 million (RMB 5 million) was repaid subsequent to June 30, 2013.~~

~~On November 16, 2012,~~As of September 30, 2013, LA GO GO had borrowed $3.25 million (RMB 20 million) from China Minsheng Bank, with annual interest rate of 6.3% and due in August 2014. This loan is guaranteed by Ever-Glory Apparel ~~entered into a line of credit agreement for approximately $4.20 million (RMB 26 million) with Bank of China guaranteed by Jiangsu Ever-Glory~~ and Mr. Kang. ~~The line of credit is also collateralized by assets of Jiangsu Ever-Glory under a collateral agreement executed among the Company, Jiangsu Ever-Glory and the bank.~~

As of ~~June~~September 30, 2013, Ever-Glory Apparel had borrowed $1.62 million (RMB 10 million) under this line of credit with annual interest rate of 6.05% and due on December 2013. Ever-Glory Apparel had also borrowed $4.05 million (including $1.79 million and RMB 14 million) from Bank of China with an annual interest rate ranging from 1.8% to 6.72%, due on various dates from July to September 2013, and collateralized by approximately $7.2 million of accounts receivable from wholesale customers. Approximately $0.4 million was repaid subsequent to June 30, 2013.

~~As of June 30, 2013, Ever-Glory Apparel had borrowed $1.62 million from Hua Xia Bank, with annual interest rate of 6.3% and due in April 2014. This loan is guaranteed by Goldenway.~~

All bank loans are used to fund our daily operations.

Amounts due from related party

In March 2012, in consideration of the guarantees and collateral provided by Jiangsu Ever-Glory and Nanjing Knitting, the Company agreed to provide Jiangsu Ever-Glory a counter guarantee in the form of cash of not less than 70% of the maximum aggregate lines of credit obtained by the Company. Jiangsu Ever-Glory is obligated to return the full amount of the counter-guarantee funds provided upon expiration or termination of the underlying lines of credit and is to pay annual interest at the rate of 6.0% of amounts provided. As of ~~June~~September 30, 2013, Jiangsu Ever-Glory has provided guarantees for approximately ~~$45.4~~$45.7 million (RMB 281 million) of lines of credit obtained by the Company. Jiangsu Ever-Glory, and its 20.31% owned equity investee, Nanjing Knitting, have also provided their assets as collateral for certain of these lines of credit. The value of the collateral, as per appraisals obtained by the banks in connection with these lines of credit is approximately ~~$21.33~~$21.46 million (RMB 132 million). Mr. Kang has also provided a personal guarantee for ~~$22.46~~$22. 6 million ~~(RMB 139~~(RMB139 million). During the ~~six~~nine months ended ~~June~~September 30, 2013, ~~$7.27~~$7.32 million (RMB45 million) was provided to Jiangsu Ever-Glory under the counter-guarantee. As of ~~June~~September 30, 2013, the amount of the counter-guarantee had been reduced to ~~$21.24~~$21.3 million (RMB131 million), which was 46.7% of the aggregate amount of lines of credit. This amount plus accrued interest of ~~$1.88~~$2.14 million have been classified as a reduction of equity, consistent with the guidance of SEC Staff Accounting Bulletins 4E and 4G.

Capital Commitments

We have a continuing program for ~~the purpose of~~ improving our manufacturing facilities and ~~extending~~increasing our LA GO GO stores. We anticipate that cash flows from operations and borrowings from banks will be ~~used~~adequate to pay for these capital commitments.

Uses of Liquidity

Our cash requirements for the next twelve months will be primarily to fund daily operations and the growth of our ~~business, some of this being used to fund new stores.~~business.

Sources of Liquidity

Our primary sources of liquidity for our short-term cash needs are expected to be from cash flows generated from operations, and cash equivalents currently on hand. We believe that we will be able to borrow additional funds if necessary.

We believe our cash flows from operations together with our cash and cash equivalents currently on hand and our unused credit facilities will be sufficient to meet our needs for working capital, capital expenditure and other commitments for the next twelve months. No assurance can be made that additional financing will be available to us if required, and adequate funds may not be available on terms acceptable to us. If funding is insufficient at any time in the future, we will develop or enhance our products or services and expand our business through our own cash flows from operations.

As of ~~June~~September 30, 2013, we had access to ~~$64.9~~$53.52 million in lines of credit, of which ~~$20.1~~$5.22 million was unused and is currently available. These credit facilities do not include any covenants.

Foreign Currency Translation Risk

Our operations are, for the most part, located in the PRC, which may give rise to significant foreign currency risks from fluctuations and the degree of volatility of foreign exchange rates between the United States dollar and the Chinese RMB. Most of our sales are in United States (U.S.) dollars. During 2003 and 2004 the exchange rate of RMB to the U.S. dollar remained constant at 8.26 RMB to the dollar. On July 21, 2005, the Chinese government adjusted the exchange rate from 8.26 to 8.09 RMB to the U.S. dollar. From that time, the RMB continued to appreciate against the U.S. dollar. As of ~~June~~September 30, 2013, the foreign exchange rate had increased to ~~6.19~~6.15 RMB to one U.S. dollar. We are continuously negotiating price adjustments with most of our customers based on the daily market foreign exchange rates, which we believe will reduce our exposure to exchange rate fluctuations in the future, and we will pass some of the increased cost to our customers.

In addition, the financial statements of Goldenway, New-Tailun, Catch-Luck, Ever-Glory Apparel, Tai Xin and LA GO GO (whose functional currency is the RMB) are translated into US dollars using the current rate method. The balance sheet items are translated into US dollars using the exchange rates at the respective balance sheet dates. The capital and various reserves are translated at historical exchange rates prevailing at the time of the transactions while income and expense items are translated at the average exchange rate for the period. ~~All exchange differences are recorded within equity.~~ The foreign currency translation gain (loss) for the three and ~~six~~nine months ended ~~June~~September 30, 2013 and 2012 was ~~$850,550, $1,158,392, $(196,365)~~$670,518, $1,828,910, $ ($192,935) and ~~$200,001,~~$7,066, respectively.

OFF-BALANCE SHEET ARRANGEMENTS

We do not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to our investors.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We do not use derivative financial instruments in our investment portfolio and have no foreign exchange contracts. Our financial instruments consist of cash and cash equivalents, trade accounts receivable, accounts payable, bank loans and long-term obligations. We consider investments in highly-liquid instruments purchased with a remaining maturity of 90 days or less from the date of purchase to be cash equivalents.

Interest Rates: Our exposure to market risk for changes in interest rates relates primarily to our short-term investments and short-term obligations; thus, fluctuations in interest rates would not have a material impact on the fair value of these securities. On ~~June~~September 30, 2013, we had ~~$16.1~~$11.7 million in cash and cash equivalents. A hypothetical 5% increase or decrease in either the short term or long term interest rates would not have any material impact on our earnings or loss, or the fair market value or cash flows of these instruments.

Foreign Exchange Rates: We pay our suppliers and employees in Chinese RMB, however, most of our ~~wholesales~~wholesale customers are located in the U.S., Japan and Europe and we generate sales from them in U.S. Dollars, Euros and British Pounds. Accordingly, our business has substantial exposure to changes in exchange rates between and among the Chinese RMB, the U.S. Dollar, the Euro and the British Pound. In the last decade, the RMB has been pegged at 8.26 RMB to one U.S. Dollar. On July 21, 2005 it was revalued to 8.09 per U.S. Dollar. Following the removal of the peg to the U.S. Dollar and pressure from the United States, the People’s Bank of China also announced that the RMB would be pegged to a basket of foreign currencies, rather than being strictly tied to the U.S. Dollar, and would be allowed to float trade within a narrow 0.3% daily band against this basket of currencies. The PRC government has stated that the basket is dominated by the U.S. Dollar, Euro, Japanese Yen and South Korean Won, with a smaller proportion made up of the British Pound, Thai Baht, Russian Ruble, Australian Dollar, Canadian Dollar and Singapore Dollar. There can be no assurance that the relationship between the RMB and these currencies will remain stable over time, especially in light of the significant political pressure on the Chinese government to permit the free flotation of the RMB, which could result in greater and more frequent fluctuations in the exchange rate between the RMB, the U.S. Dollar and the Euro. On ~~June~~September 30, 2013, the exchange rate between the RMB and U.S. Dollar was ~~6.19~~6.15 RMB to one U.S. Dollar. For additional discussion regarding our foreign currency risk, see the section titled Risk Factors in the Annual Report on Form 10-K for fiscal year ended on December 31, 2012. Fluctuation in the value of Chinese RMB relative to other currencies may have a material adverse effect on our business and/or an investment in our shares.

ITEM 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our reports under the Securities Exchange Act of 1934, as amended ( the “Exchange Act”) is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.

Evaluation of Disclosure Controls and Procedures. As of ~~June~~September 30, 2013, the end of the fiscal quarter covered by this report, we carried out an evaluation, under the supervision and with the participation of our management, including our chief executive officer and our chief financial officer, of the effectiveness of the design and operation of our disclosure controls and procedures. Based on the foregoing, our chief executive officer and chief financial officer concluded that our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) were not operating effectively as of ~~June~~September 30, 2013. Our disclosure controls and procedures were not effective because of certain “material weaknesses” described in the “Management’s Annual Report on Internal Control over Financial Reporting” section in Item 9 of our annual report for fiscal year ended December 31, ~~2012.~~2013. As of ~~June~~September 30, 2013, we had not completed the remediation of these material weaknesses.

Limitations on the Effectiveness of Disclosure Controls. Readers are cautioned that our management does not expect that our disclosure controls and procedures or our internal control over financial reporting will necessarily prevent all fraud and material error. An internal control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected. The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any control design will succeed in achieving its stated goals under all potential future conditions.

Remediation Measures for Material Weaknesses

As stated in our 2012 Form 10-K, our management concluded that, based on the assessment of our principal executive officer and principal financial officer, our internal controls over financial reporting were not effective as of December 31, 2012.

We are in the process of taking remedial measures to address the material weaknesses identified in our 2012 Form 10-K. During the three months ended September 30, 2013, we evaluated internal control policies and procedures. We established additional procedures whereby the Company's internal audit department gathers related party transaction information and submits these to the audit committee for review and approval.

During the three months ended September 30, 2013, the Company's internal audit department began a detailed independent examination of transactions with Jiangsu Ever-Glory to determine any other impact on the Company.

We will continue to develop and implement our remediation plan to address the material weaknesses identified in the 2012 Form 10-K.

Changes in Internal Control over Financial Reporting

Our management has worked, and will continue to work to improve our internal controls over financial reporting. During the three months ended ~~June~~September 30, 2013, there were no changes in our internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

We know of no pending legal proceedings to which we are a party which ~~are~~is material or potentially material, either individually or in the aggregate. We are from time to time, during the normal course of our business operations, subject to various litigation claims and legal disputes. We do not believe that the ultimate disposition of any of these matters will have a material adverse effect on our financial position, results of operations or liquidity.

ITEM 1A. RISK FACTORS

There has been no material change in the information provided in Item 1A of Form 10-K Annual Report for the year ended December 31, 2012 filed with the SEC on April 16, 2013.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

~~None~~None.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4. MINE SAFETY ~~DISCLOSURES~~DISCLOSURES.

Not applicable.

ITEM 5. OTHER INFORMATION

None.

ITEM 6. EXHIBITS

The following exhibits are filed herewith:

Exhibit No.		Description

~~31.1~~		~~Certifications pursuant to Rule 13a-14(a) or 15d-14(a) under the Securities Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.~~

~~31.2~~		~~Certifications pursuant to Rule 13a-14(a) or 15d-14(a) under the Securities Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.~~

~~32.1~~		~~Certifications pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.~~

~~32.2~~		~~Certifications pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.~~

~~101.INS~~		~~XBRL Instance Document (**)~~

~~101.SCH~~		~~XBRL Taxonomy Extension Schema Document (**)~~

~~101.CAL~~		~~XBRL Taxonomy Extension Calculation Linkbase Document (**)~~

1~~01.DEF~~		~~XBRL Taxonomy Extension Definition Linkbase Document (**)~~

~~101.LAB~~		~~XBRL Taxonomy Extension Label Linkbase Document (**)~~

~~101.PRE~~		~~XBRL Taxonomy Extension Presentation Linkbase Document (**)~~

* Filed herein

** XBRL (Extensible Business Reporting Language) information is furnished and not filed or a part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, is deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and otherwise is not subject to liability under these sections.

SIGNATURES

In accordance with the requirements of the Exchange Act, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

~~August 19,~~November 14, 2013	EVER-GLORY INTERNATIONAL GROUP, INC.

	By:	/s/ Edward Yihua Kang
		Edward Yihua Kang
		Chief Executive Officer
		(Principal Executive Officer)

	By:	/s/ Jiansong Wang
		Jiansong Wang
		Chief Financial Officer
		(Principal Financial and Accounting Officer)

	June 30, 2013			December 31, 2012			September 30, 2013			December 31, 2012
Raw materials	$	13,212,328		$	5,687,612		$	4,881,602		$	5,687,612
Work-in-progress		14,125,834			7,296,733			28,587,023			7,296,733
Finished goods		32,836,826			36,770,852			41,421,577			36,770,852
		60,174,988			49,755,197			74,890,202			49,755,197
Less: allowance for obsolete inventories		(3,477,690	)		(3,716,741	)		(4,273,258	)		(3,716,741	)
Total inventories	$	56,697,298		$	46,038,456		$	70,616,944		$	46,038,456

Bank	June 30, 2013		December 31, 2012
Nanjing Bank	$	14,079,204	$	16,743,277
Shanghai Pudong Development Bank		6,464,000		7,014,833
Bank of Communications		9,703,498		6,953,834
HSBC		2,424,000		5,414,316
Everbright Bank		3,232,000		3,166,000
China Minsheng Bank	1,062,152			4,239,800
Bank of China	5,670,220			3,387,620
Ping An Bank	572,228			-
Hua xia Bank		1,616,000		-
	$	44,823,302	$	46,919,680

Bank	September 30, 2013		December 31, 2012
Nanjing Bank	$	17,531,424	$	16,743,277
Bank of Communications		9,774,845		6,953,834
Shanghai Pudong Development Bank		6,504,000		7,014,833
China Minsheng Bank	5,997,973			4,239,800
HSBC		5,398,857		5,414,316
Hua xia Bank		1,626,000		-
Ping An Bank		1,457,565		-
Everbright Bank		-		3,166,000
Bank of China		-		3,387,620
	$	48,290,664	$	46,919,680

	June 30, 2013		December 31, 2012		September 30, 2013		December 31, 2012
Nanjing Knitting	$	747,004	$	756,842	$	319,768	$	756,842
Nanjing Ever-Kyowa		78,272		128,505		30,061		128,505
Ever-Glory Vietnam		1,117,607		2,183,039		1,207,557		2,183,039
Ever-Glory Cambodia		1,414,613		90,428		3,642,021		90,428
Kunshan Enjin		16,774		-		40,392		-
Total	$	3,374,270	$	3,158,814	$	5,239,799	$	3,158,814

Related Party	Type of transaction	June 30, 2013		December 31, 2012			Type of transaction	September 30, 2013		December 31, 2012
Jiangsu Ever-glory	Accounts receivable	$	1,059,477	$	214,226		Accounts receivable	$	130,004	$	214,226
Jiangsu Ever-glory	Advance/(Accounts payable)		1,271,387		(53,680	)	Advance/(Accounts payable)		1,346,079		(53,680	)
Jiangsu Ever-glory	Interest income		1,878,066		1,262,701		Interest income		2,141,410		1,262,701
Jiangsu Ever-glory	Counter guarantee deposit		21,241,299		32,150,730		Counter guarantee deposit		21,372,743		32,150,730
Total		$	25,450,229	$	33,573,977			$	24,990,236	$	33,573,977

	Three months ended						Nine months ended
	September30,						September30,
	2013			2012			2013			2012

NET SALES	$	106,659,519		$	69,269,905		$	244,100,494		$	169,691,109

COST OF SALES		81,254,688			53,941,736			178,924,172			129,173,371

GROSS PROFIT		25,404,831			15,328,169			65,176,322			40,517,738

OPERATING EXPENSES
Selling expenses		14,249,753			8,608,695			35,999,155			21,409,222
General and administrative expenses		6,684,580			4,152,162			16,670,132			11,355,568
Total Operating Expenses		20,934,333			12,760,857			52,669,287			32,764,790

INCOME FROM OPERATIONS		4,470,498			2,567,312			12,507,035			7,752,948

OTHER (EXPENSES) INCOME
Interest income		272,321			360,001			910,111			970,221
Interest expense		(757,390	)		(449,413	)		(2,285,614	)		(1,454,157	)
Change in fair value of derivative liability		-			91,000			294,000			381,800
Other (expenses) income		831,952			(130,359	)		684,311			105,954
Total Other (Expenses) Income		346,883			(128,771	)		(397,192	)		3,818

INCOME BEFORE INCOME TAX EXPENSE		4,817,381			2,438,541			12,109,843			7,756,766

INCOME TAX EXPENSE		(933,933	)		(164,609	)		(2,412,105	)		(1,010,475	)

NET INCOME		3,883,448			2,273,932			9,697,738			6,746,291

Foreign currency translation (loss) gain		670,518			(192,935	)		1,828,910			7,066
COMPREHENSIVE INCOME	$	4,553,966		$	2,080,997		$	11,526,648		$	6,753,357

EARNINGS PER SHARE
Basic and diluted	$	0.26		$	0.15		$	0.66		$	0.46
Weighted average number of shares outstanding
Basic and diluted		14,779,268			14,765,942			14,777,015			14,765,568

	Wholesale segment		Retail segment		Total
Six months ended June 30, 2013
Segment profit or loss:
Net revenue from external customers	$	58,711,923	$	78,729,052	$	137,440,975
Income from operations	$	5,339,873	$	2,696,664	$	8,036,537
Interest income	$	624,195	$	13,595	$	637,790
Interest expense	$	1,412,096	$	116,128	$	1,528,224
Depreciation and amortization	$	478,315	$	3,212,576	$	3,690,891
Income tax expense	$	828,834	$	649,338	$	1,478,172

Six months ended June 30, 2012
Segment profit or loss:
Net revenue from external customers	$	59,468,451	$	40,952,753	$	100,421,204
Income (loss) from operations	$	4,494,836	$	690,800	$	5,185,636
Interest income	$	603,785	$	6,435	$	610,220
Interest expense	$	938,754	$	65,990	$	1,004,744
Depreciation and amortization	$	498,899	$	1,798,011	$	2,296,910
Income tax expense	$	687,462	$	158,404	$	845,866

	Wholesale segment		Retail segment		Total
Nine months ended September 30, 2013
Segment profit or loss:
Net revenue from external customers	$	122,883,599	$	121,216,895	$	244,100,494
Income from operations	$	9,120,617	$	3,386,418	$	12,507,035
Interest income	$	889,693	$	20,418	$	910,111
Interest expense	$	2,105,457	$	180,157	$	2,285,614
Depreciation and amortization	$	733,911	$	4,088,272	$	4,822,183
Income tax expense	$	1,433,686	$	978,419	$	2,412,105

Nine months ended September 30, 2012
Segment profit or loss:
Net revenue from external customers	$	104,369,912	$	65,321,197	$	169,691,109
Income from operations	$	6,803,378	$	949,570	$	7,752,948
Interest income	$	962,901	$	7,320	$	970,221
Interest expense	$	1,339,173	$	114,984	$	1,454,157
Depreciation and amortization	$	745,799	$	2,821,980	$	3,567,779
Income tax expense	$	211,069	$	799,406	$	1,010,475

		Three Months Ended June 30,								Three Months Ended September 30,
		2013				2012				2013					2012
		(in U.S. Dollars, except for percentages)								(in U.S. Dollars, except for percentages)
Sales	$	59,129,485	100.0	%	$	47,195,031	100.0	%	$	106,659,519		100.0	%	$	69,269,905	100.0	%
Gross Profit	$	19,478,568	32.9	%	$	13,586,581	28.8	%	$	25,404,831		23.8	%	$	15,328,169	22.1	%
Operating Expense	$	15,411,211	26.0	%	$	11,164,465	23.7	%	$	20,934,333		19.6	%	$	12,760,857	18.4	%
Income From Operations	$	4,067,357	6.9	%	$	2,422,116	5.1	%	$	4,470,498		4.2	%	$	2,567,312	3.7	%
Other Income (Expenses)	$	(571,605)	(0.1)	%	$	250,043	0.1	%
Other Expenses (Income)									$	(346,883	)	(0.3	%)	$	128,771	0.2	%
Income tax expense	$	768,541	1.3	%	$	321,010	0.7	%	$	933,933		0.9	%	$	164,609	0.2	%
Net Income	$	2,727,211	4.6	%	$	2,351,149	5.0	%	$	3,883,448		3.6	%	$	2,273,932	3.3	%

	Three Months Ended June 30,								Increase/
	2013				2012				(Decrease)
	(in U.S. Dollars, except for percentages)
Gross Profit	$	19,478,568	32.9	%	$	13,586,581	28.8	%		43.4	%
Operating Expenses:
Selling Expenses		9,898,106	16.7			6,966,335	14.8			42.1
General and Administrative Expenses		5,513,105	9.3			4,198,130	8.9			31.3
Total		15,411,211	26.0			11,164,465	23.7			38.0
Income from Operations	$	4,067,357	6.9	%	$	2,422,116	5.1	%		67.9	%